Self employed and working a salaried job at the same time. Do I lump all income as "Business Income"?

[antran]

I am in a particularly interesting situation. My wife and I own a small business, of which only the 2 of us own. At the same time, I am also working full time and am salaried through the organization I am at. My question is: when I start calculating net income; do I add business income (small business) AS WELL AS the salary income? I am currently using QuickBooks Self Employed and I'm stuck in which to classify the income. Is it personal? Or is it lumped in with Business income? Thanks so much.

[Rick19744 · Accepted solution]

While you did not include this in your facts, I assume that your salaried position provided you with a W-2?

The W-2 will not be included in your business income.  This will be entered separately in the TT program.

Your business income and expenses will be entered on a Schedule C in the TT program.

[antran]

Fantastic! You were ridiculously quick in responding.

Yes. The salaried position would provide a W-2, yes.

So then, for sake of clarity. All salaried, W-2 payroll income is not included or should not be included with my personal small business income.

[Rick19744]

Correct.

[VolvoGirl]

But it all goes on your personal 1040 tax return.  Here's some general info about business income.  Oh, and you might need to fill out 2 schedule Cs,  50% for you and  50% for wife.  Unless you need to really file a partnership return instead.  You should probably see an accounted the first year to make sure you know what and how to do it.

If you have Self Employment income you have to file a schedule C in your personal 1040 return. You may get a 1099Misc for some of your income but you need  report all your income.  So you need to keep your own good records.

Fill out Schedule C here
The Business Tab - Continue
I'll choose what I work on
Business Income and Expenses
Then….
Profit or Loss from Business, click Start or Update

You use your own name and ssn or business name and EIN if you have one.   You should say you use the Cash Accounting Method and all  income is At Risk.  After you put in your income and expenses  if your net profit is $400 or more you will pay 15.3%  Self Employment tax in addition to your regular income tax.  The Schedule SE will be automatically filled out for it.

After it asks if you received any 1099Misc it will ask if you had any income not reported on a 1099Misc. You should be keeping your own records.  Just go through the interview and answer the questions.   Then you will enter your expenses.

Here is some IRS reading material……

IRS information on Self Employment
<a rel="nofollow" target="_blank" href="http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center"...>

Pulication 334, Tax Guide for Small Business
<a rel="nofollow" target="_blank" href="http://www.irs.gov/pub/irs-pdf/p334.pdf">http://www.irs.gov/pub/irs-pdf/p334.pdf</a>

Publication 535 Business Expenses
<a rel="nofollow" target="_blank" href="http://www.irs.gov/pub/irs-pdf/p535.pdf">http://www.irs.gov/pub/irs-pdf/p535.pdf</a>

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 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.

[VolvoGirl]

Also you probably should ask these questions in Quickbooks support
<a rel="nofollow" target="_blank" href="https://community.intuit.com/quickbooks-online">https://community.intuit.com/quickbooks-online</a>

[longj4669]

I have a follow-up question after finding this thread through TT and Google...

We are in a similar situation and trying to prepare for the upcoming tax season.  My fiance/common-law married wife and I (not legally married, but living together for past 10 years) are about to start a new business, likely to be setup as a partnership.  We currently file separate returns and both have FT jobs.

My annual salary regularly exceeds the SS cap and the last few months of the year I do not pay SS tax.  When filing Schedule C and, as it relates to paying SE taxes a SECOND time, am I required to pay the employee portion (7.65%) of the SE tax if my income has already exceeded the cap?

My wife is not in the same situation but dependent upon business profit, may exceed the income cap (SS cap) quickly with the additional business income.

Any assistance is appreciated! (@volvogirl) 

[VolvoGirl]

No you don't pay more.  If you  have W2 income, you have to break out the Social Security and Medicare taxes. Only the Social Security part maxes out.  Turbo Tax does it automatically for you.

The SE tax includes what you already paid in from your W2s so your schedule SE tax will only be the difference up to the max amount of $8,249.80 for social security. The max income for social security for 2019 is $132,900 between W2 wages and the schedule C Net Profit.

[Twill822]

What about the employER portion of the social security tax? Since his previous employer would have reached the max as well, is his own company required to pay their half of the tax even though his previous employer already full filled the max requirement??

[Twill822]

What about the employER portion of the social security tax? Since his previous employer would have reached the max as well, is his own company required to pay their half of the tax even though his previous employer already full filled the max requirement??

[VolvoGirl]

I can't find it in my notes but I believe only the EE employee part maxes out.  You still pay the ER part.  You are a different employer.  Sorry.