@Sjoechapman Thanks for participating today. This a great question.
Sole proprietors don't pay themselves wages in the same sense that an employee would be paid. You can't cut yourself a salary and withhold taxes as you would for employees. Sole proprietors pay themselves by taking draws from the company's profits. This could be done by writing a check from the business account to yourself personally, by transferring money from the business account to the personal account, or simply by withdrawing cash from the business account. There are no rules about how much you're allowed to withdraw. But you will want to be sure you have an accounting system so you can make sure you always have enough in the business account to cover expenses and obligations. However you choose to pay yourself, its important to keep meticulous accounting records. As a sole proprietor, you and your business are the same legal and tax entity. All the income of the business is your income. However, in order to file your taxes you will need to be able to accurately account for all the funds that go in and out of your business so self employment taxes can be correctly calculated, and all expenses can be deducted. Its essential to have separate business and personal accounts. If you have a DBA name, the business account can be opened in that name. If not, you can get a business account in your own name. I strongly recommend having a business credit card as well. If you have commingling of personal and business funds, filing your taxes is going to be confusing, time-consuming, and you could likely draw scrutiny and attention from the IRS that you'd rather avoid. Regardless of how you set things up, you will be paying both self employment tax and income tax on all the income you generate. Self employment tax covers your social security and medicare contributions. As you are both the employee and employer in your business, you will be paying the full 15.3%. (As a W-2 employee in the past, you would have half deducted from your paychecks and the other half paid by your employer.) This is also sometimes referred to as FICA taxes. In addition to that you will be paying income tax on your income. That amount will depend on which tax bracket your total income falls into, and what deductions you have. You will need to make quarterly estimated tax payments throughout the year on your income, as you can incur underpayment penalties otherwise. Here are some great resources to help with that:
https://turbotax.intuit.com/tax-tips/self-employment-taxes/a-guide-to-paying-quarterly-taxes/L6p8C53...
https://turbotax.intuit.com/tax-tips/self-employment-taxes/tips-for-paying-estimated-taxes/L1nDU0sUs
https://turbotax.intuit.com/tax-tips/small-business-taxes/estimated-taxes-common-questions/L1luHqVdl
https://turbotax.intuit.com/tax-tips/small-business-taxes/estimated-taxes-how-to-determine-what-to-p...
