How to File Taxes for Self Employed

Updated on January 05, 2008
M.D. asks from Crowley, TX
23 answers

My husband and I recently started our own business. We run it in addition to his full time job. It is just the two of us, no employees, and sometimes some contract labor. My question is how do we file our taxes? Do we include these earnings with our regular income taxes or do we file complete seperate business taxes? There is really no overhead in what we do so pretty much all of it is income. Should we be making payments through out the year? Any advice is greatly appreciated!

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A.B.

answers from Houston on

you REALLY need to call Jerry Roebuck @ National Business Consultants in Pasadena...TRUST ME...he is NOT expensive and knows his stuff! I too am self employed and use him. Good Luck!

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M.Y.

answers from Austin on

My husband has been self employed for 30 years and I have been self employed a little over 15 years. I highly recommend getting a CPA for this.

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C.Z.

answers from Dallas on

Hi M.
My husband is a CPA and specializes in small businesses/self employed. He would be more than happy to give you a consultation to discuss your needs if you are looking for a CPA. He is affordable and very flexible.
[email protected]____.com
###-###-####
His name is Greg.

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S.

answers from Dallas on

I highly recommend you get a CPA to assist you. You need assistance now in planning for preparing your taxes; you need to start keeping up with your mileage and other expenses. You will need to determine whether you should be collecting sales tax. You will need to determine whether you need to file form 1099 for your contract labor. You will report the business income on a separate schedule, but it will be part of your total income, including wages. If you have profit, you will owe regular plus self-employment tax on the profit and you should pay in quarterly to avoid penalties. You may be surprised by the things you can write off (legally) against that income, so you need a CPA to help you. You can get help on your own by going to the IRS web site at www.irs.treas.org and looking at Pub. 17 (Your Federal Income Tax); you may want to order one in hard copy - it's free and they will deliver it to your home. You may want to get Turbo Tax or something like that, but I can tell you that it's very hard to do it on your own even with tax prep software - after all, the results are only as good as the info that goes in. I would take up the offer of the poster who offered a consultation with her husband the CPA. You can also call the Dallas Chapter of CPA's to get a referral near you with experience in small business.

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D.L.

answers from Houston on

Hi M.,
I do taxes with HR Block. Just wanted to comment on a couple of things that have been said you don't have to have a Tax ID to have a business unless you plan on using it for something such as buying items and they will not include the taxes. You have to file your business income or for sure the IRS will come back for you. You will need to file a Schedule C in addition to your regular 1040 for his job. It's not calculated together your Schedule C (Business Income) will be included on a entirely different line so you can pay the correct amount of self employment taxes. You can make payments throughout the year and sometimes that's the best thing for you to do in order to make sure you don't owe taxes at the end of the year. You can contact me privately and I can discuss further about what options you have available and what kind of things you should carry on your taxes. I look forward to talking to you and anyone else who has tax questions soon at
[email protected]____.com.
P.S. Please make sure you put Mamasource in your title so your email won't get deleted I get so much SPAM mail it's not even funny!

1 mom found this helpful
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A.S.

answers from Dallas on

We have a great CPA. His name is Keith Neifach, and his number is ###-###-####. He may be able to do a free consulatation. You may want to find someone as soon as possible because they are very busy during tax season.

Good Luck!

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H.L.

answers from Austin on

M.,
I was in the same boat for a long time, and I can say for sure if we didn't have a CPA, our taxes would have been through the roof. Advice? Get a CPA

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M.L.

answers from Dallas on

I do my own taxes every year but I'm no professional advisor. One year my husband received a 1099 for sub-contract work and had to pay the SS & Medicare taxes in addition to the federal. That's about my only experience with it on personal tax returns but I am studying to be a CPA and have worked in accounting for years.

If the IRS determines that you end up having to pay too much at the end of the year they may require you to file quarterly (so you're not slammed at the end of the year and they have your money sooner).

From what I have learned, if you are not incorporated, you would file the earnings with your regular income. I do remember having to fill out an additional form to report the earnings, deduct any expenses, and calculate the self employment tax. Also, if you run your business out of your house then there is overhead. Whatever portion of your utilities is used solely for your business can be deducted, as well as any mileage used for the business (does not include commuting).

If you want to avoid paying accounting consulting fees, the best advice I can give is to tell you to get online with the IRS and download their instructions and pay close attention to any areas that may concern your situation. This is what I usually do. Whenever you have questions or need a little further clarification just call them. You might have to hold for a little while during tax season but it's well worth knowing you have done everything correctly.

However, I highly recommend you do consult a tax professional because there are so many different items that need to be taken into consideration.

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E.H.

answers from Dallas on

The answer will also depend upon how you are (or aren't) incorporated.

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S.S.

answers from Killeen on

Michelle, I have a bookkeeping and tax business that I run out of my home, (in Killeen).
You need to report all the income and expenses on your personal tax return using a Schedule C, unless you are a corporation or partnership. If you are a corp or a partnership, you will need to do a business tax return.
And yes, you should have been paying in estimated taxes during the year. You also need to do a 1099-misc for anyone that you had as an independent contractor (contract labor) IF they made over $600.00. These must be sent out by Jan 31st.
Please give me a call @ ###-###-#### and I will help you answer any questions you have. Call me. S. Stone

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S.

answers from Houston on

What kind of business do ya'll run ?
All your income should be filed.
We have a neighbor who does babysitting for a living and did not file all her income & she had to pay later !
How can you & your husband both run your own business,
what do ya'll do for Medical coverage ? it is very expensive to carry on your own, I have to work to have it.
Have a good day !

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L.

answers from Dallas on

M.,
Most small business owners and the self-employed get into tax trouble because they don't know all that is required of them. Get a CPA, do not do this yourself. I cannot recommend one for you, sorry. Good luck!

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N.W.

answers from Odessa on

I have not read your responses first, but please consult an accountant. I have seen too many small business close due to tax liens when people thought they were paying the right taxes. I know it can be hard to let go of more money but I think it is a great long term investment.

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P.L.

answers from Houston on

My husband and I have been running our own business for four years now and have always filed our taxes with our regular taxes. I don't know what kind of business you do or how you intend to file, but I highly recommend getting a CPA to help you out with it all, at least the first time you file. After that you may feel comfortable filing it yourself. There are lots of other issues that come up with owning your own business like state taxes and things that you need a professional to advise you about before you end up owing everybody thousands of dollars. (No one told us, and now we owe the state back taxes!) Also be sure to send 1099-MISC to all contract laborers you paid more than $600 to for the year.

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S.L.

answers from Houston on

The business expenses will go on a schedule C, ie: auto exp, office exp, and etc.
Did you get any 1099's? 1099's are considered misc. income. Consider this, you may have more deductions than you realize. If you own your own home, you could have a home office deduction. If you had to purchase anything at all for your new business, that is a deduction. For example, filing your dba, business cards, any extra on line protection, or even just a web address. The goal is to find as many legitimate expenses to help minimize your self-employment tax.
One additional note: the first year you will fall into the safe harbor rules meaning you will not penalized for not paying quarterly, but starting in 2008 (because you started business in 2007) you must file quarterly.

A bit about me: I am a SAHM with a 1 1/2 son and in 2 months we are expecting our second son. I am a SAH tax mom, so if you have any additional questions, please let me know. I hope it helps.

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M.R.

answers from Longview on

M., there is a special schedule (Schedule C) that you include with your Form 1040 to report your business income if you are self-employed. You will also need Schedule SE to calculate self-employment tax (this is the same thing as the social security and medicare tax that comes out of your husband's paycheck since he works for someone else). I would suggest that you get IRS publication 334. It should answer most of your questions. You can download it from the internet at http://www.irs.gov/pub/irs-pdf/p334.pdf - it is a large file, so unless you have high speed internet, it will take a while.

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C.R.

answers from San Antonio on

You have to file seperate because business do not get refounds they get tax credit. But i have a great bookkeeper and Tax person that we use for our business. She is great she finds every little bit to use as a tax write off. Just email me and let me know if you would like her number. And this sounds crazy but did you get a tax id number every business needs one.

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R.V.

answers from Houston on

You need to keep seperate records for your business and then when you go do your taxes they will do the business and then combine it with your personal. Not sure what your business is but you should be able to deduct gas or mileage on your vehicles. You also should be able to deduct cell or telephones. If you do things in your home such as computer their are things you can deduct. You need to talk to your tax person because they will tell you what all you can do. Usually after the first year they can set it up to pay quarterly if that is what you want. You can also change the deductions your husband claims to help out with that. But I would talk to your tax person. I have several businesses so have been doing this for years. If you would like to talk call me ###-###-#### R.

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C.K.

answers from Dallas on

hi M., yes, you should be making payments throughout the year. i believe a penalty is acessed if you have not paid within 90% of your tax liability. Good news is that you can make a payment by Jan 15, 2008 to get you close and avoid the payment. i have my own business too, no inventory. You can deduct the contractors and you will need to provide them with a 1099 (if you paid them more than $600 in the tax year 2007). You will also need to file a 1099 summary with the IRS, i believe by the end of Jan and I think it is a form 1096 - you can buy at Office Depot type stores. Depending on how your business is set up you don't necessarily file taxes as a business. My CPA (which I HIGHLY recommend preparing your taxes in this situation) prepares a business return and then my personal return, which is filed jointly with my husband who has a regular FT job. Also in the state of Texas you are responsible for a franchise tax if your business earned more than $150K. Again, this becomes complicated stuff and I would highly recommend talking to a tax professional. I prefer a CPA, because that is what I am comfortable with, I am not sure if the H&R block type places would handle this, and again, it is a comfort thing for me. As for going forward, you will want to make 2008 tax payments on April 15, June 15, September 15 and your final 2008 payment is Jan 15 2009. best of luck - I will tell you too that my business is very simple, but the taxes are very complicated (thanks to the government and legislatures!) and I would recommend seeking professional help. good luck!

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J.W.

answers from Dallas on

I am self employed and have a CPS. You do have to do your business tax first before you do your personal tax. Then you have a form to add to your personal taxes. I really recomment getting a CPA to do it so you know it is right. It is a nightmare doing business taxes. I always did my personal ones until I began working for myself.

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T.F.

answers from Dallas on

Well we are in the same boat as yall, only we have been in business for 7yrs. We use a cpa to do our taxes cause there is so much stuff that we didnt know about a small business and the taxes that come with it. Once you get going on it, it comes pretty easly. I love my cpa. Anytime i have a question about things, they are happy to help. Shop around for one that way you can find the one that is good for you. They all have there own prices. We also use quick books. That is a great thing for a business and my cpa knows the program very well. Im getting good at doing the books so that the cpa does not have to. The more you can do for your self the less it caost. Good luck on your business. =)

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E.Y.

answers from Austin on

Hi M..

What you file will depend upon how your business is set up...sole proprietor, LLC, etc. My Advice (having owned my business for 2 years) is to get a really good accounant. It will cost some money but will be well worth it. There are alot of things that need to be filed and they will be able to clearly lay it all out for you. We use Mary Bird Bowman in Central Austin and she and her staff are great and make it very easy! Good luck.

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L.C.

answers from Dallas on

In 2008 you will need to make at least quaterly estimates. Prioblem is your first estimate is due the same day as you 2007 taxes 4/15/08. If 2007 was the first year you were in business you should have no late payment penalty. You can overwithold on your hubbys paycheck by filing in a new w-4. I do bookkeeping and taxes outside of my full time job. OH I forgot. If you paid anyone over $600 in 2007 you will have to provide them a 1099 so they can file their taxes properly. They have to have theirs by 1/31 and IRS has to have their copy by 2/28.

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