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New Business - how do taxes work?

Paying my taxes

12:08 am on Jan 25, 2011 (gmt 0)

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I am a opened a web shop here in Austin TX and since my company is new, I made few thousand dollars last year (with less than three clients).
My question is: how do I pay (if any) my taxes? where do I get this information? Do I need something from my clients?
I am a new at this new 'self employed' venture and I'd love to know the steps. Do I need an accountant to take care of these things?

Thank you and I appreciate your answers.
12:31 am on Jan 25, 2011 (gmt 0)

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You don't absolutely need an accountant, but one is *highly* recommended. A good one will recommend how to lower your tax liability by making sure you deduct all legal deductions available to you (and keep you from getting yourself into trouble by taking deductions that you shouldn't). It's pretty much too late for 2010 (although there are a few income lowering issues still available).

How you pay depends on the classification of your business. Unless you registered a corporation or partnership, you will most likely attach Schedule C to your personal tax return.

For where to start, if you decide not to use an accountant (or tax preparer), I suggest you peruse the treasure chest of info available at IRS.gov [irs.gov], paying close attention to the pubs for small businesses.
1:53 am on Jan 25, 2011 (gmt 0)

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If you make over US$600 from a client within a tax year they are supposed to send you (and the IRS) a 1099-MISC. Many companies / people do not currently do that, but starting in 2012 they will have to (new tax laws come into effect in 2012). You claim the income on Schedule C.

You *can* set up your business in someplace like Bermuda as a corporation to avoid most taxes, but to do that there is an initial investment, including a lawyer there, to set up and maintain the corporation. And, you should understand the tax codes (at least the basics) in both places so you don't get caught up in a tax avoidance scheme by the US's IRS. It's not hard to do, but unless you're making over US$100K it's not cost effective. Once you hit income of US$250K+ it becomes very effective and worth the cost.
12:01 am on Jan 28, 2011 (gmt 0)

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Thank you for all your replies,
So far the profits are so low (less than $600 because I am doing some free work) and I haven't received any tax documentation from any client.
But question: how do you move your company to Bermuda, is there any information for this?
Thank you for all the info