I asked two different questions on here, one was about quarterly taxes and one was about commission fee write-offs. We are live sellers making side money from selling online. One answer was yes, to make estimated quarterly payments and one was to file as a sole proprietor and deduct expenses with a schedule C form. Are these mutually exclusive or they are both relevant to my case? I was already provided the links and tools to do both (thank you!) So essentially, do I 1. estimate quarterly taxes and make direct payments to IRS AND/OR use information from a 1099-k to file a schedule C alongside personal income? Thanks in advance for any clarification!
In your case both apply.
When you file your tax return, it will include the Schedule C. The schedule is a bit like a profit and loss template except for taxes. Your income and expenses for the year will be reported on the Schedule C. On the Schedule C, a net profit or taxable income total (gross income less all expenses) will determine how much tax you owe.
Since no employer is paying taxes on the income, and there are no federal with holdings from the income as you would normally experience if you were employed and receiving a W-2 for the company, there is tax due.
Taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments. If you are in business for yourself, you generally need to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax.
If you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.
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