This content has been marked as final. Show 5 replies
The answer to this question can be quite involved. If you are operating as a sole proprietor, income tax may be due on any profits you make. The income will be reported on Schedule C of your return. If it, and other income earned, are above a certain threshold depending on your tax status (single, married, dependents, etc.), taxes will be payable. On the other hand, however, operating losses from Schedule C may be used to offset other income if available. The rules for a corporate form of business are varied, but, in general, the income for most legal forms used by small businesses is reported on Schedule C. Another complication, if profits are sufficient, is the requirement to pay "estimated taxes" quarterly. The best place to go for information re income taxes is the IRS web site at www.irs.gov. They have several self-help publications and guidelines to help the small business person in this area. Two important considerations here are the need to maintain excellent records of all income and expense items and pay all taxes when due. This includes estimated income tax payments, withholding taxes if you have employees, and sales taxes if required in your state. If you are not comfortable with all the rules and regulations, find an accountant or other qualified person to assist you. And, ask for their assistance in establishing an effective record keeping system to handle these issues.
If a business fails to show a profit within a three year period it is
considered a hobby and you cannot claim any business expenses on your
tax return. A home based business has allowable deductions such as a
percentage of your mortgage, taxes, insurance, utilities, etc. plus
depreciation on the value of your home. This is done as follows: you
must have one or more rooms devoted specifically for your business use
and you calculate the percentage of square footage they are of the
entire house. Let's say for example that it's 20 percent. You then take
20% of all the above expenses to claim as a deduction in your tax
return. However, "what the government giveth the government taketh
away" applies here. If, in the future, you decide to stop the business.
sell your house then you must pay tax on the profit you made and that
tax will be the same percentage you claimed as a business expense in
prior years; 20 percent in this case.
Another thing to consider is that your business may have to be handicap
accessible. Check with your County Clerk's office on that. It is
required in New York and I don't know if it's a national law or local
Thanks for that info, I was actually having problems understanding all this issues of taxes for a home based business. I also have a home based business and didn't know how to figure out my taxes.
You should also explore an option of forming a small corp. It will save you good $$ on taxes. Its not cheap to set up and pay for accounting services, but 99% the tax savings of the corp greatly surpass the fees to run the corp. You also need to be profitable and have good cash flow.
It really depends on how your business is set up. Are you a Sole Proprieter or Incorp?
If it's a S.P, then you don't need an Tax Id number, you will just use
your ss# and all the money you recieve will be counted as your personal
income. I would suggest setting aside 30% for taxes. When you do your
taxes, it will tell you how much you owe.
If you can't find anything on the IRS website, you can also talk to
either a lawyer or an accountant for help. You may also want to check
out websites for small businesses or your local Chamber of Commerce....
Good luck to you.
Good luck to you. I'm trying to get my fiance to open his own pool and spa company too.
Oh.. also, go to your local City Hall. You will have to get a biz
license from them also. They may also have you get one for the cities
you will provide service for.
Japanese Engines payday loan business AdWords keyword tool internet providers