Hi Artsy Bunny,
Thank you for joining our event today!
Congratulations on the grand opening of your business. You are on the right track with applying for your California county/city business license and seller's permit.
Here is a link to your guide for instructions on Schedule C, Profit or Loss from a business, Sole Proprietor. This will provide guidance for when you make a profit or loss (no profit).
https://www.irs.gov/instructions/i1040sc
For the tax year(s) where you will show a profit or your self-employment earnings are $400 or more and you anticipate you will owe $500 or more in tax, you will need to make estimated tax payments.
You can use 1040 Schedule SE to figure out how much your self employment tax you will have based on your self employment income. Here is a link to the form.
https://www.irs.gov/pub/irs-pdf/f1040sse.pdf
Estimated tax payment are due based on the income as follow;
For income received Jan1 - March 31, estimated tax is due April 15
For income received April 1 - May 31, estimated tax is due June 15
For income received June 1 - August 31, estimated tax is due September 15
For income received Sept. 1 - Dec. 31, estimated tax is due Jan 15
The CA rates for self employment differ from the federal rates. To avoid a penalty, you must pay on or before the below dates.
30% due on 4/15/24
40% due on 6/17/24
0% due on 9/16/24
30% due on 1/17/25
Underpayment of penalty can be avoided however, if you pay at least 90% of the tax you owe for the current year, or 100% of the tax you owed for the previous tax year or you owe less than $1,000 in tax after subtracting withholdings and credits.
Something to keep in mind, a trade or business is generally an activity carried and with the idea of making a profit. You do not need to make a profit to operate a business or trade but you need to have a profit motive. Here is a thought provoking link "Five things to remember about hobby income and expenses".
https://www.irs.gov/newsroom/five-things-to-remember-about-hobby-income-and-expenses
I am also providing a link to the the Small Business Resource with the State of California to aid in your search for small business guidance.
https://calosba.ca.gov/for-small-businesses-and-non-profits/small-business-resources/
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