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Starting a business
Garick
Registered User regular
Registered User regular
So I started a self business this year and it's about time to file last years taxes. I noticed however that for a business you need to file quarterly and it's hard to figure out if that means immediately. For people that have done this before, did you send two tax filings at the same time? I.E. last years and this quarters?
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Honestly you need an accountant, because there are a a billion caveats, but generally business taxes need to be filled every quarter. The big payable of these is the payroll taxes and employee withholdings.
What kind of business did you start? An LLC?
Jus to be clear, when you say "It's time to file taxes this year" are you talking about your business taxes or your personal taxes?
The IRS doesn't like it when people pay no taxes all year and then pay them all at filing time. So, if you're making money independently, you need to estimate how much your taxes will be for the year and then pay it in roughly equal quarterly installments throughout the year.
Then, next year, you file your taxes and determine whether you've over- or underpaid for this year. At the same time, you start making estimated tax payments on next year's income.
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You can pay your quarterly taxes online, and theres a fee for missing a quarter and they'll come into play when you file, I think its 15 each quarter. I've missed a payment here and there and lumped them into the next quarter, and it was fine. When you owe the government large sums, I've seen indications that you can set up installment payments, but I've never had to do this.
A CPA can help you more, and locally might not be as expensive as you imagine, its worth looking into if handling things on your own is intimidating.
There is a line for self-employment activity on the regular form, if you don't have any kind of incorporation and you're only talking about supplemental income you can generally do this. If you're running a side gig selling shit on Etsy or streaming Minecraft or fixing computers you just need to keep track of all your income (Keep good solid books! this line can be an invitation for the IRS to sniff around, especially if you're trying to claim business expenses as well, in this kind of case you never want to pull the "oh I can claim this as a business expense" thing for anything except materials directly used - I actually got stuck for deducting the full value of a set of power tools that I kept in my van and also used at home). That only applies up to a point, and a lot of stuff is involved like taxes paid from your day job, percentage of total income, raw dollar amount on the self-employment line, whether you end up owing or being owed at the end of the year... At least a consult with a tax professional is in line, but you might not need somebody permanently in the loop... Hell, liability/E&O insurance might actually be a bigger concern than taxes for a side gig.
If you're talking about your primary income or even a significant chunk compared to your day job, dedicated location, anything like that, you're going to need quite a bit more in place, both to pay the IRS their due as well as to protect yourself from permanent financial ruin if something happens. You almost want a professional on speed dial if you're going to do this.
Financial stuff can be catastrophic if you get something wrong, especially if this is primary income. If you can't afford to even talk to somebody, you can't afford to be fully self employed. If it's a side gig, you might be overthinking it, but again, every situation is different and if you do the wrong thing it could go very badly, somebody who's actually got eyes on the books needs to be your guiding voice, not internet randos.
Alright, so what I've gathered here is that I will need to file my personal 2020 taxes, then make an estimated payment on my freelancing work for this first quarter in 2021. (I.E. both in April) and continue doing that each quarter.
Thanks for all the advice everyone!
You'll also want to double check with an accountant because any sort of regular 9-5 pay fucks with quarterly filings (another reason to form an actual company).