Y

[JBedford]

Thanks for your questions, @jenny42 !

1) Self-employment taxes will be due on all self-employment income. 

2) Yes, self-employment tax is on top of regular income tax. 

3) You would report all income received during the calendar year on the tax return for that year (unless you opted to keep your books on the accrual basis, but that's a more advanced topic). So if it was received in 2023, then you would file it on your tax return due April 2024. 

4) We are not allowed to give advice on S Corps or LLCs, other than to say that being a sole proprietor is the simplest option. If you are considering another option, then I would advise consulting with a local or online tax accountant or attorney who advises on such issues. LLCs are a "disregarded entity" for tax purposes, so there is no real tax effect to forming one. 

5) Business expenses are deducted from business income. 

6) The IRS doesn't much care what bank accounts you use. However, it's best practice to have a separate business account, rather than commingling business and personal funds.  

7) No, you would have to amend the previous return, unless the deadline for doing so had already passed. 

Hope this helps, please let me know if not!

[JBedford]

1. Yes. 

2. You are paying regular income tax on the money, the rate of which varies with income, plus self-employment tax of 15.3%. 

5. You can't deduct a home office for self-employment unless it's used exclusively for self-employment. If you have items that you use for both, you can deduct the percentage of self-employment business use. These expenses are generally not deductible for W-2 employment (although they are on some state returns). 

6. No, as a sole proprietor, it all goes on one tax return. 

7. Three years. 

[JBedford]

You got it! 

[JBedford]

5. The chair would not be deductible except as a business expense. That's the only option. 

6. Yes. 

8. No. The IRS doesn't care what accounts you have. They only care about how much you earned and how much you had in expenses. 

[JBedford]

No, that cannot be written off on your federal return, though some states have different rules. Either way, a deduction is a deduction, and reduces your taxable income the exact same way.