Ok, I admit I should have done a whole lot more research. I've been winging it, and need some advice. I buy and sell items online. It is a source of income, not a hobby. I know I will need to pay state and federal taxes, and I have been collecting state sales tax too.
I just have no idea about social security or anything else I am supposed to be withholding and paying. I just have this overwhelming fear that I have screwed up and the day of reckoning is coming. Yikes!! Can you smell my fear??
All comments are welcome. Thank you!!!
Can anyone point me to an easy to understand resource??
*update - thank you for the comments for far.
I don't have any employees. This is just an ebay type business. Maybe that helps ( or makes it easier??)
Thank you smart Mama's!!
contact a local CPA & they will point you in the right direction.
My vote is to use them for the 1st year, & then fly solo if you're comfortable.
Don't panic, but do be sure you are putting money aside for the taxes, social security and so forth. One thing you can be sure of is that when you file your Income tax returns, you will be getting a quick lesson from the IRS about these things. Not saying that to scare you. They are actually pretty good about understanding people who just get into these things without adequate knowledge, and if you deal with them on a level headed, honest basis, they will work with you. But, yes, do go to any of the sources others have mentioned and educate yourself as much as you can.
I also have a VERY small home-based paralegal business. You should try to make advance tax payments to both state and federal. Go on their websites to find the address to send such payments. Be sure to note on your check that it's an advance tax payment or X year to be sure it gets properly credited. I don't really know how much to send - I just send something every quarter to both state and federal. Once you send in the first payment, they will send you forms to send in with your subsequent payments. Oh, I almost forgot, you can make your federal tax payments on line now. Go to the IRS website for instructions on signing up!
As for social security, you are supposed to withhold/pay $100 for every thousand earned. If you don't make any advance payments, they will take it out of your return. I have never made an advance social security payment; the tax preparer just takes care of it when I file my taxes.
As for sales tax, I have absolutely no idea.
Here's to a lucrative business!
I'm curious as well. I've always claimed my taxes from watching kids, but this year I've been saving reciepts for expenses and such and fully planning on hiring a CPA that was refered to us this year who got another childcare provider friend back $11,000.
You have already received good information regarding payroll taxes so I won't address that except to say, prepay something. The IRS assesses a penalty to any business that does not make some sort of pre-payment. You can get more information at these websites:
http://www.edd.ca.gov/Payroll_Taxes/
http://www.irs.gov/businesses/index.html?navmenu=menu1
If you have not registered with the State Board of Equalization, do it now. The Board requires that you have a resale # if you are going to collect sales tax. The reporting period will depend on your volume of business. It could be annual, but the Board could also require monthly payments with quarterly reporting. Here's the link to the BOE website:
http://www.boe.ca.gov/sutax/sutprograms.htm
I am a bookkeeper and handle these issues for my clients all the time. Don't hesitate to contact me if you have further questions.
In CA I know you would need to pay Estimated Taxes quarterly or pay a penalty at the time you go to file. I would sit down with an accountant sooner than later to have them straighten your process out. Good luck!
Call you local Vo-Tech that is associated with the school system. Find the person who organizes the adult classes. This person can tell you if they offer any small business support classes or programs. Ours has a 1 year program where they take you and basically hold your hand to help you get set up with a federal tax id, also state and local, help you get your insurance fixed up. They help you set up payroll where you withhold, and match, someones Social Security, etc...they hold your hand and teach you how to run your business successfully.
Otherwise you are going to have to pay an accountant the money to set up your company as a LLC, and do all the tax stuff. If you have a small business account they may be doing stuff like this anyway.
For everyone...finding a group of people in your community, like a child care home directors group, they can tell you who the best tax guy is that understands each and every thing about the ins and outs of running a home business and all that stuff. If you get it set up early on it becomes natural to you to do this stuff all the time.
Talk to legal and tax counsel ASAP. Find someone in your area that is reputable and you trust and go from there. If you are flying solo now and not doing it correctly, let a professional set it up for you and maintain it until you do feel ok to take it solo.
We run our business from home, non MLM, it is raw materials brokering/consulting. We have good legal and tax counsel because it is VITAL to follow all the rules pertaining to IRS.
I do all my books with Quickbooks. I have an at home mom who runs a bookkeeping business from her home and she is a pro with QB so I pay her to "tutor" me so I get it right.
I run payroll with QB for hubby and myself. When I run payroll, it automatically records the next payment that is due to IRS. Payroll taxes are due by the 15th of the month, you can set up to submit online, and it is easy. As far as payroll and with holding taxes, You input your salary and how you want to set up (ex: I am married and I make sure the max is taken from my check) and QB calculates the correct taxes per IRS. You can change the salary amout if needed during the year.
You must file 941 reports quarterly and pay taxes that are due. Also, you must have a valid tax id # .
I like using QB. I send a copy of my QB file to my tax guy about once a quarter for his review and let me know if I need to make adjustments.
I think the best resource you can get is a good tax person/bookkeeper who can help you navigate through the rules and regulations of running a business.
Do you have a business plan, forecasting, etc... You do not want to be on the list for the IRS... Make sure you fix it and get everything on the up and up now.
Good luck with your business.
ETA: Even with no employees, there are reports to be filed. Good luck
I hope you are a good bookkeeper. You can pay your taxes for yourself when you file. If you have an employee you should be sending payments based on their earnings every quarter....Oct, Jan, April, July.
To run a business you need a tax ID # from the government. When we became an LLC (limited liability company) our lawyer did it all for us.
Find a good bookkeeper/account who should be able to provide you advice and set you up. CPAs are usually more expensive and charge by an hour. Have you registered your business? If so, are you running it as sole proprietor vs LLC? If you haven't registered your business yet, you need to understand the differences and determine how you should register.By the way, having a small business might be to advantage as depending on the nature of your business you could write off some of your expenses.
I would take some business classes through a local community college, personally.
