Sole-proprietor quarterly taxes

[mrm395]

Hi - I started a sole proprietor small business in California earlier this year, with my first sales in June. I am primarily selling on Etsy. My husband works a full-time job making more than $250k/year. My income will be significantly less of course, as I am just selling a few things per month. 

I honestly wasn't aware I had to pay quarterly estimated taxes for this business, so I want to confirm that I do in fact need to pay them. I think since June I have only sold about $650 worth of products, which is fully offset by my startup costs and inventory costs. Considering I haven't actually made any money yet, how much would I need to pay in quarterly estimated taxes?

Since my husband makes a lot of money, how does that impact my tax rate? We are married and filing jointly.

Do I have to pay quarterly estimates to my state too?

Thank you!

[DashonnonH]

Hi, if you have a net income that is negative after start-up cost and current year expenses are deducted, No, you would not need to make any estimated payments. 

When you do have positive net income, remember that you will pay 2 separate taxes on this income. 1. Income taxes 2. Self-Employment taxes.

Income taxes.

Your net self-employed income will be added to your husband's income and taxed starting with the tax bracket his income is currently in. 

For example, for married filling jointly individuals in 2023, taxable income from $190,751 to $364,200 is taxed at 24%. This means if he earns within the numbers above, your self employed income will be added to his income and taxed at 24%. 

Self-Employed Tax

The self-employed tax is calculated on 92.35% of your net self-employed income only.

https://turbotax.intuit.com/tax-tips/self-employment-taxes/the-self-employment-tax/L8xXjolB4

Yes, once you have positive income, to avoid paying penalties and/or interest, you would make estimated quarterly payments to the Federal and State(s).

Tax Caster is a great tool for checking your tax liability/refund and running scenarios for different situations during the year. 

https://turbotax.intuit.com/tax-tools/calculators/taxcaster/

Thank you for joining us today!

[mrm395]

Thank you @DashonnonH !