This is my first year as a self-employed, what would be the best advice before the end of year, should i buy equipment like a computer and tools? please advice

[Critter-3]

If you are new to being self employed and  are acting as your own bookkeeper and tax preparer you need to educated yourself....  

If you have net self employment income of $400 or more you have to file a schedule C in your personal 1040 return for self employment business income. You may get a 1099-Misc for some of your income but you need to report all your income.  So you need to keep your own good records. Here is some reading material……

IRS information on Self Employment….
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center 

Publication 334, Tax Guide for Small Business
http://www.irs.gov/pub/irs-pdf/p334.pdf 

Publication 535 Business Expenses
http://www.irs.gov/pub/irs-pdf/p535.pdf 

Home Office Expenses … Business Use of the Home

https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

https://www.irs.gov/pub/irs-pdf/p587.pdf

There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Home & Business return and will help you keep up in your bookkeeping all year along with calculating the estimated payments needed ....
http://quickbooks.intuit.com/self-employed

Self Employment tax (Scheduled SE) is generated if a person has $400 or more of net profit from self-employment on Schedule C.  You pay 15.3% for 2017 SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  You do get to take off the 50% ER portion of the SE tax as an adjustment on line 27 of the 1040.  The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 line 57.  The SE tax is in addition to your regular income tax on the net profit.
 


PAYING ESTIMATES
For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% for 2017  SE Tax on 92.35% of your net profit in addition to your regular income tax on it. So if you have other income like W2 income your extra business income might put you into a higher tax bracket.

You must make quarterly estimated tax payments for the current tax year (or next year) if both of the following apply:
- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits. 
 
- 2. You expect your withholding and credits to be less than the smaller of: 
    90% of the tax to be shown on your current year’s tax return, or 
  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

To prepare estimates for next year, You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.

OR Go to….
Federal Taxes or Personal (H&B version)
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button

[Opus 17]

That'a a fairly advanced question.  Do you understand all the basics first?  About expenses and depreciation and startup costs and net operating losses?

Do you want to minimize your taxable income or show an actual loss?  What are your gross income and your expenses?  Do you actually need equipment, and are deciding the best time to purchase, or are you trying to "pad" your expenses to reduce your taxable income?  

[mexbarajas]

So many questions, I'm trying to understand the basics, reading all IRS material I can find, I want to reduce my taxable income but also i want to do the right thing before the end of year, as this is the first year I have been using an old computer I had, also have been using my old tools that I used at home, so I guess for a new business there must be some good advices before the end of year to get ready for next year and also take advantages of write offs, tax deductions and actions that I should be thinking on today,

I can see myself talking to a CPA next year to do my taxes and then get the typical " you should have done this before the end of year"

that's the type of advice I'm looking for

[VolvoGirl]

Then maybe see a CPA now before year end.

[Opus 17]

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@mexbarajas wrote:

So many questions, I'm trying to understand the basics, reading all IRS material I can find, I want to reduce my taxable income but also i want to do the right thing before the end of year, as this is the first year I have been using an old computer I had, also have been using my old tools that I used at home, so I guess for a new business there must be some good advices before the end of year to get ready for next year and also take advantages of write offs, tax deductions and actions that I should be thinking on today,

I can see myself talking to a CPA next year to do my taxes and then get the typical " you should have done this before the end of year"

that's the type of advice I'm looking for

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So, why do you think random strangers are a substitute for a CPA?  We can review some basic principles, but this is really not the place for back and forth discussion that will take your unique situation into account.

Regarding a computer, for example.  I will start by assuming it is an "ordinary and necessary" expense of your business.  For the simplest case, I will assume that you will purchase a computer for 100% business use.

In that case, if the cost is less than $2500, you can deduct it as an expense in the year you place it in service in your business (begin using it for business).  If more than $2500, you have to depreciate the computer (take it's wear and tear into account over time rather than all at once).  You can choose standard depreciation, bonus depreciation, or section 179 depreciation, each of which has advantages and disadvantages, depending on how long you will be in business and how often you need to replace the computer.  (A video editor might need to replace their computer much more often than a painter who only uses the computer to track expenses and make customer appointments.)  The three kinds of depreciation are probably too much to get into here, though, and that's the simple case.  If the computer will partly be for business and partly personal use, it gets more complicated.

In general, expenses are deducted against income when they occur.  Assets are accounted for when they are placed in service, which is not necessarily when they are purchased. (Assets generally are property that cost more than $2500 and have an expected life of more than 1 year.)  So if you know you have a profit this year that will be taxable, and you know you have items to purchase for your business, it will generally be better to incur those expenses before the end of the year to reduce your taxable income.  But that is not always the case, which is why personal advice is so important.