Business Taxes and Legal Issues

Resources and information on business taxes, legal business structures, and other related issues.

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Old 03-11-2008
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Estimated Taxes
Do you HAVE to file estimated taxes and when do you have to start doing so?

Can't you just pay the taxes you owe when you file your tax return? Or will there be penalties because you didn't do a 1040-ES?

My first year income won't be very much. A couple grand at most...
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Old 03-11-2008
debsoffice08
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Default Re: Estimated Taxes
I'm not an expert by any means, but I just went to the IRS website the other day with the same question. My understanding is, and someone correct me if I'm wrong, but if you are a sole proprietor, you wouldn't have to pay estimated payments. I would go to the IRS website and there is a questionaire about estimated taxes on the self employed page. I took that and it told me that I don't have to pay in estimated taxes. Hope that helps.

Debra Nail
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Old 03-12-2008
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Default Re: Estimated Taxes
I wouldn't worry about it your first year unless you expect to have a large income. The IRS assesses penalties for filing estimated taxes based on the previous year's taxable income. Also, there are deductions you can take on your tax return that could reduce your "taxable" income although it won't affect the "net income" on your income statement, such as mileage, or office-in-home expenses, depreciation, etc. So even though you actually made $2,000 you might wind up with a loss on your tax return. You could also have carry-forward loss from the previous year that could reduce the current year's taxable income.
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Old 03-12-2008
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Default Re: Estimated Taxes
Thanks for asking that question. I've been wondering, too.
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Old 03-18-2008
cjmccall
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Default Re: Estimated Taxes
I was wondering the same thing! I'm actually going to meet with an accountant next month (after tax season) to see where I stand and what I should be doing. If I find out anything helpful, I'll pass it along!
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Old 03-18-2008
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Default Re: Estimated Taxes
Although I only started last summer, I am now estimating my annual income and will be filing the self-employment and income taxes accordingly. This will ease the tax burden next spring and get me in the habit.

SE taxes are filed in 4 installments (15.3% of expected annual net income, I believe). The deposits are due no later than 04/15, 06/15, 09/15 and 01/15.

Income tax is filed quarterly (I deposit 20% of net income for the previous quarter) 04/15, 07/15, 09/15, 01/15.

I will adjust the 01/15 deposits to match actual income for the year.
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Old 05-07-2008
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Default Re: Estimated Taxes
Ask your accountant but I think I can help in a simplified manner: By the end of the tax year you are required to have paid in at least the amount of taxes that you owed last year or 90% of what you are going to owe this year as a household.
If you need to make quarterly payments to make that number, then you need to do so.
IF however, say your husband is working & is already having money deducted for income taxes that will cover your income also (especially if it is small as a start up) then you do not have to make any payments. (Does that make sense??)
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Old 06-01-2008
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Default Re: Estimated Taxes
Good answers. Just starting out and setting up. I've wonder about the social security part. Another thing to look into. Thanks for the infor. Pattyben
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Old 06-02-2008
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Default Re: Estimated Taxes
I was just getting ready to pay my first quarter taxes. (Late I know )Personally, I figure I'd rather do it now than wait and possibly not have the funds I'll need come tax time. I'd rather be safe than sorry I guess is my take on it.

Thanks for the info on it though.
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Old 06-02-2008
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Default Re: Estimated Taxes
Originally Posted by Nanners74 View Post
I was just getting ready to pay my first quarter taxes. (Late I know )Personally, I figure I'd rather do it now than wait and possibly not have the funds I'll need come tax time. I'd rather be safe than sorry I guess is my take on it.

Thanks for the info on it though.
I am the same way!! I would much rather be safe than sorry & always tend to over estimate what I owe 'just in case'. I would rather have a surprise refund than an amount due that I did not anticipate!! I personally think that is smart business.
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Old 06-02-2008
dclayton
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Default Re: Estimated Taxes
I'm new and some of these questions may sound quit silly but, do you all have a seperate business set up? Are the taxes paid through the business or after you transfer it to your personal account as income? Is there any other way to do this except through a personal business set up?
Yes I will be asking an accountant but I need to get started first.
Donna
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Old 06-02-2008
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Default Re: Estimated Taxes
It's not a silly question at all... it's one I'm sure we all had to figure out before we got started! The answer isn't as simple as Yes or No because it depends on how you set up your business! One of the best books that I read while setting up my business (and I'm still doing that) was from the NOLO series. Check out their website http://www.nolo.com/ for some info on Sole Proprietorship vs. LLC.

Marcia
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Old 06-02-2008
dclayton
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Default Re: Estimated Taxes
Thank you Marcia for the helpful information. I will read this.
Donna
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Old 06-03-2008
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Default Re: Estimated Taxes
I believe a lot of people start their small business as a sole proprietor - just a personal business instead of taking the time & money to set up a separate business until they know if this is going to be a viable business that they are going to want to continue doing for some time. Then they can make the decision whether to continue as a SP or change to another form. Unless there is some high financial risk involved or partners, I usually recommend to my clients that they give a new business a year as a SP. Then revisit the topic to see where they see it going.
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Old 06-04-2008
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Default Re: Estimated Taxes
That's good advice. I spoke with a tax advisor shortly after beginning my biz and was given the same advice. The advantages and disadvantages were discussed and I think for right now this is best, SP, for me that is.
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Old 06-04-2008
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Default Re: Estimated Taxes
Originally Posted by dclayton View Post
I'm new and some of these questions may sound quit silly but, do you all have a seperate business set up? Are the taxes paid through the business or after you transfer it to your personal account as income? Is there any other way to do this except through a personal business set up?
Yes I will be asking an accountant but I need to get started first.
Donna
As the others said, there is no reason why you can't start out as a sole-p and then decide later. I would still recommend even as a sole-p you have a separate business account and run all busines income expenses through that account, for audit purposes. If you pay estimated self-employment tax, I would pay that out of the business account as a business expense. If you wait and pay at the end of the year then you could pay it out of either personal or business, because they will be combined on your personal tax return.

If you pay a tax preparer to do your taxes you can deduct the cost of filing the business forms (Sch C, Depr schedule, etc.) as business expense the following year, so make sure your tax preparer breaks out the cost for each form for you.
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