Some general info...... You will need to keep good records. You may get a 1099Misc at the end of the year if someone pays you more than $600 but you need to report all your income no matter how small. You might want to use Quicken or QuickBooks to keep tract of your income and expenses. There is one called QBSE QuickBooks Self Employed that works with Turbo Tax and will give you a free online tax return next year.
http://quickbooks.intuit.com/self-employed To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax.
Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment. You pay 15.3% 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.
Here is some IRS 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 PAYING QUARTERLY ESTIMATESThe first year you don't need to pay estimates as long as you pay in (by withholding) as much as your tax was last year. But if you will have a big income you should send in estimates so you don't owe too much next April on your tax return.
For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% 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 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).
The 1040ES quarterly estimates for 2017 are due April 18, June 15, Sept 15 and Jan 16, 2018. Your state will also have their own estimate forms. You mail in the estimates with a check or you can do it electronically at the IRS and maybe your state.
Here are the blank Estimates and instructions from the IRS…..
http://www.irs.gov/pub/irs-pdf/f1040es.pdf Or you can pay the IRS electronically See
http://www.irs.gov/uac/Electronic-Payment-Options-Home-Page
