My wife and I have always filed our taxes as "married filing jointly" since we got married back in 2007. This year (2021), my wife has started her own side business and has registered as a sole proprietorship in our state (Ohio). She is trying to make sure she stays on top of her taxes in this new situation, and I was hoping there would be a TurboTax product that can help her. It looks like the Self-Employed version may be what she's looking for, but I'm not sure if she will need to set up a new account to start using this product, or if we should continue using the TurboTax account that we've been using to file our personal taxes. If it matters, I am listed first on our personal taxes. Thanks in advance to anyone who can offer some guidance in this.
No, you will not need a new account. Just start filling in your tax return information as usual in your current product.
In the "Wages & Income" tab you will find the "Self-employed" topic. That is where you will enter the business description followed by income and expenses for the new business.
You will be asked to upgrade your current product as needed to handle the new business forms/entries.
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Some general info on self employment...........
You will need to keep good records. You may get a 1099NEC at the end of the year if someone pays you more than $600 but you need to report all your income no matter how small. You might want to use Quicken or QuickBooks to keep track of your income and expenses.
There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Online Self Employed return....
When you are self employed you are in business for yourself and the person or company that pays you is your customer or client.
To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax. You will need to use the Online Self Employed version or any Desktop program but the Desktop Home & Business version will have the most help.
Here is some IRS reading material……
IRS information on Self Employment
Pulication 334, Tax Guide for Small Business
Publication 535 Business Expenses
You pay Self Employment tax on $400 or more of net profit from self-employment in addition to any regular income tax. You pay 15.3% 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 may need to send in quarterly estimated payments to cover any self employment tax and increase in income.
You must make quarterly estimated tax payments for the current tax 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).
Turbo Tax will calculate the 1040ES estimated payments
How to make the Estimated payments
Here are the blank Estimates and instructions…..
You can still file jointly. If you have been using turbotax online, you will need to upgrade to the self-employed version once you start your tax return next year, but this is done within your ongoing account.
Being self-employed means, in most cases, add a schedule C to the tax return in the name of the spouse with the business income. Schedule C reports gross income and expenses, and calculates taxable profit, which flows to the main form 1040 where it is combined with your other income, personal deductions and credits, dependents, and so on.
However, if she has formed a partnership with someone who is not her spouse (either as an LLC or unincorporated partnership), then she must file a form 1065 partnership return. The 1065 will also generate a K-1 income statement for each partner that is included on the partner's personal tax return. Form 1065 can only be prepared with Turbotax for Business, which is a separate program only available for PC, there is no online or Mac version. The deadline for a 1065 is March 15, not April 15, and there is a substantial late fee.
Turbotax is not designed to track business income and expenses and calculate any estimated tax payments that might be required. For that, you may want to use a business accounting program such as Quickbooks.