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Tuesday, January 10, 2012

The Forms-Pay unto Caesar what is Caesar's

This is part 2 of my Tax posts, See 2 posts down for part 1 and remember, I'm not an expert so consult a tax professional with any questions.

I'm writing these posts to help those of us who JUNK as a business.

The T*a*x form you fill out for your business is the S*ch*ed*ule C as seen above.
It will be a separate page of your 1040 long form. As long as you are not incorporated this is the form you use to pay the taxes on your business.

Don't let the form scare you, there is a line to put your income, A line to put your product purchases, a line for car usage, supplies and other things you might have spent money on that are business related. Note that not all your meals and not all your travel is deductible (this is why a CPA is important) they can help with the nuances of this form.

Line 31 is your Profit or Loss and this number is then transferred to your 1040 page 1 form on line 12. You want this amount to be as low as possible, so be sure you figure in your automotive mileage and every other possible legitimate expense you can find. You will pay taxes based on this number.

Now here is an important detail. For your business income you will not only pay income t*ax*es but you have to pay the so*ci*al sec*urity/Med*ica*re as well.
Normally these are taken from your paycheck... but because you don't have a paycheck you are responsible for paying this amount directly. Here's the kicker, it's almost twice what you pay as an employee. Yep that's right as a self employed person you pay twice the SS/Med that an employee pays. This is Sc*hed*ule SE and it is a separate page. It's also called the Self Empl*oyment T*a*x.

Here's the other thing. You really should pay your taxes throughout the year. This is called an es*tim*ated t*a*x payment and there is a form (1040es coupon) that your CPA will prepare for you that needs to be sent in 4x each year. This will save you from unnecessary penalties at the end of the year and also relieve the burden of paying the whole amount at one time.
Note the *** are there to keep my blog post from being flagged and also note, that I am not a CPA or an expert and none of my advise should be taken without consulting a CPA first. As they say with medication, "consult your doctor before starting any treatment plan :)"

1 comment:

Curtains in My Tree said...

I know now why I never started my little junking antique business, first I don't want to pay an accountant $350-500 to figure it out for me.
Guess i never was a good business person I would rather be the person buying all the goodies but I do sell them at all my yard sales when i get tired of items

thanks for the lesson

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