Hello Im a " contractor " in sales and have collected multiple payments from different customers for buildings they have ordered this year (2021). The company who has contracted me will not be inputing the data in their system until the acutal buildings will be INSTALLED which will be in 2022.
MY QUESTION:
Since my credit card processing provider will report this as income, what should i do in a situation like this as far as paying the taxes on the payments i have collected.
It is also hard for me to know which customers have been installed at this point because i have sold 50+ buildings this year. Any help would be greatly appreciated.
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What they do is immaterial to what you need to do. If the 2022 form 1099 amount is too high next year because they included money you got in 2021 then you just make an adjusting entry on the Sch C.
All the money you got in your hand during 2021 is reportable income even if a 1099 is never issued ... use your records for the tax return.
If you are new to being self employed, are not incorporated or in a partnership and are acting as your own bookkeeper and tax preparer you need to get educated ....
If you have net self employment income of $400 or more you have to file a schedule C in your personal 1040 return for self employment business income. You may get a 1099-NEC for some of your income but you need to report all your income. So you need to keep your own good records. Here is some 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
Home Office Expenses … Business Use of the Home
https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction
https://www.irs.gov/pub/irs-pdf/p587.pdf
Publication 463 Travel, Gift, and Car Expenses
https://www.irs.gov/pub/irs-pdf/p463.pdf
Publication 946 … Depreciation
https://www.irs.gov/pub/irs-pdf/p946.pdf
There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Self Employed return and will help you keep up in your bookkeeping all year along with calculating the estimated payments needed ....
http://quickbooks.intuit.com/self-employed
Self Employment tax (Scheduled SE) is generated if a person has $400 or more of net profit from self-employment on Schedule C. You pay 15.3% for 2017 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.
PAYING ESTIMATES
For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% for 2017 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 (or next 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.)
To prepare estimates for next year, You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.
OR Go to….
Federal Taxes or Personal (H&B version)
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button
Thanks for all the information and links as well.
One of my concerns were that i have would be paying taxes this year (2021) for that payments i've collected and then taxed again in 2022. The company will bereporting the job in 2022( i have confirmed the invoice wont be in their system until next year).
I have actually been paying estimated taxes every 2 weeks minimum because im scared of making an error with my amatuer book keeping skills lol. Luckily i have all the processed payment history and bank statements to go off of.
What they do is immaterial to what you need to do. If the 2022 form 1099 amount is too high next year because they included money you got in 2021 then you just make an adjusting entry on the Sch C.
Awesome. Exaclty the answer i was looking for. Guess i have some learning to do. Cheers!
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