I want to start a business on ETSY selling hand-made jewelry. I have several questions:
Is it better to do an LLC or sole proprietorship/self employed for the type of business I want to start? also do I need a business license either way?
Do I have to pay Medicare and SS taxes with this type of business? If so how much will I have to pay, when , and do send it directly to the IRS?
How far back can I go to deduct my startup expenses or expenses if I am just now wanting to start my business on ETSY? I am asking because I have been purchasing materials and supplies since last year because I was going to start the business last year but I was not able to due to an unexpected illness.
Will starting my business on Etsy help me overall on my personal taxes? I file a married filing jointly status with my husband and last year we made a combined income of around 70,000 before adjusted gross. I just dont want to owe taxes if I start this business.
Do I also have to pay GRT to my state when starting this business?
If I use a payment app thru ETSY to get paid how does it affect my taxes?
Happy to help with your questions! Congratulations on your business. We will answer your questions accordingly as you typed them.
1. If you are the only owner of the business, you are considered a sole proprietor. Now, registering your business as an LLC is only to protect your personal assets from liability.
2. You will pay Medicare and social security taxes via your Schedule C sole proprietor (when you file your personal 1040 tax return) and only on the net profit (income minus expenses). The deadline is April 15th.
3. Please see this resource for your startup costs Startup Costs
4. The business will be part of your personal tax return, combined with your husband's income. You could do tax planning in Nov/December to make sure you have paid in enough towards your taxes. Please use our TaxCaster Calculator to project your income.
5. Please contact your state to confirm whether or not you will be subject to GRT when starting your business.
6. The payment app will generate a 1099-K for all income received above $600, you'll report this as gross receipts on your Schedule C.
Hope this helps, please let us know if you have any further questions!
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