1) Do I need to pay quarterly estimated taxes? How much and when?
Yes, you likely need to pay quarterly estimated taxes if you expect to owe $1,000 or more in taxes for the year
The IRS requires estimated tax payments to be made quarterly:
- April 15
- June 15
- September 15
- January 15 of the following year
You can often increase your withholding from your W-2 job to cover the tax liability from your side gig, effectively "paying" your estimated taxes through your regular paycheck. Use the IRS Tax Withholding Estimator tool online to help you figure out how much extra to withhold. This can often be simpler than making separate quarterly payments.
IRS article: A guide to withholding, estimated taxes and ways to avoid the estimated tax penalty
TurboTax help article: https://turbotax.intuit.com/tax-tips/self-employment-taxes/myths-about-quarterly-taxes-for-the-1099-...
2) What should I be tracking for deductions?
For your aquatics training courses, you'll be able to deduct "ordinary and necessary" business expenses on Schedule C, Profit or Loss from Business. Some of the common expenses are supplies, equipment, advertising, training & certifications, work related uniforms, Mileage expenses if you used vehicle for business.
3) Should I open a separate bank account for my side gig?
Opening a separate bank account for your side gig is highly recommended. It makes tracking income and expenses for your Schedule C much, much simpler. All your business transactions are in one place, avoiding the need to sift through personal statements. In case of an IRS audit, having a separate account makes it clear what money is business-related versus personal.
4) Would forming an LLC help me save on taxes?
For federal income tax purposes, a single-member LLC is typically a "disregarded entity" by default. This means the IRS treats it the same as a sole proprietorship. Your income and expenses from the LLC are reported on Schedule C of your personal tax return (Form 1040), and you still pay self-employment taxes. So, for federal income tax, you're taxed just like a sole proprietor.
@ljb322 Thanks for the question!!
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