Self employed (DBA) and employed (Hourly employee) tax help

[Badtzmaru93]

Hello! 
I am a freelance graphic designer as well as a hourly employee in the food industry. Before I file for my DBA as a sole proprietor, need some help. Researching for hours gave me a few different answers so I want to make sure I understand everything. Apologies for the clueless questions. Completely new to this. 

1. Do I pay annual taxes since it’s a DBA /sole proprietorship? Rather than quarterly taxes?

2. Getting a little bit of conflicting numbers, even after completing the ITA on the IRS website. I do not have to file taxes if the income from the graphics are below $499?

2. What documents During filing will I need since I’ll be an hourly employee as well as the Graphic design DBA? Obviously the graphic work won’t be a  steady regular income. I read that I will need to just attach schedule C 1040 to my personal taxes. Please guide me on this.

thanks in advance 

[Bsch4477]

1. Whether you have to pay quarterly taxes depends on your other income and total tax liability. You might want to consult an accountant since you are starting a business to learn how to conduct it properly. 
2.  All income must be reported but self employed income under $400 is not subject to self employment tax.  

3.  You need your W-2 to report your income from your employer and 1099-misc forms and/or record of cash/check payments for your business to complete Sch C.  

[Pollybt1233]

Hello,

I've had free lance income for several years.  I took HR Block's tax course though it was many years ago.  The IRS treats "employee" income as "wages or salary" and is reported on your W2.  "Freelance/Sole-proprietor" income is "self-employment income" and should be reported on a 1099-MISC by whoever is paying you.  Did you get a 1099 for this income? Sometimes business don't report this and you have to track them down to get the 1099-MISC. But if they paid you less than $600, they are not required to report this income to IRS.  

1. I gather that this is the first year you have income as a sole proprietor.  You most likely will not have to pay quarterly taxes in this first year.  Going forward, however, depending on how much money you owed this year (if any), you may have to pay quarterly taxes for next year based on how much you earned last year.

However, instead of paying quarterly taxes next year, you can simply increase the withholding on your W2 income.  You would need to estimate how much you will owe because of your 1099 income. Your employer can deduct more from your paycheck.   Fill out a W-4 and change your withholding. If estimating how much you will owe next year is a challenge, I would talk to someone more knowledgable like a tax professional or accountant.  

If you don't pay quarterly taxes, you will be charged a "penalty." But honestly in my case the "penalty" has never been that much ($20 or less). So I have never paid quarterly taxes, so I that I can keep my money in my control.   We did increase the withholding on my husband's W2 income. 

2. Not sure about this. 

3.  Documents needed: your W2, 1099-MISC, and receipts for any expenses you had because of your 1099 income.  You can and should deduct expenses you incurred due to this income. It will reduce your "net" income and therefore reduce your taxes owed. Look at publication 535 for eligible expenses.  

Hope this helps!

[MinhT1]

@Badtzmaru93

Regarding the second part of your question, you are required to report the income from your graphic design work whatever its amount if you file a tax return.

You are not required to file a tax return if your self-employed income is below $400 and it is your only income.

[Carl]

1. Do I pay annual taxes since it’s a DBA /sole proprietorship? Rather than quarterly taxes?

No. Taxes are due quarterly. But understand how this works. You do not "have" to pay your federal taxes quarterly. But here's the risk. If at tax filing time if what you owe the IRS exceeds $1000 or 10% of your total tax liability (whichever is higher) then you will be assessed an underpayment penalty on top of the taxes you'll have to pay.

2. Getting a little bit of conflicting numbers, even after completing the ITA on the IRS website. I do not have to file taxes if the income from the graphics are below $499?

You are not understanding the rules.

- If your reportable income from all sources (including self-employment income) exceeds $12,300 (double that if filing joint.) then you are required to file a tax return. Period. End of story.

- If your self-employment income alone  exceeds $400 then you are required to file a tax return. Period. End of story.

In both cases above, you still report all income from all sources.

2. What documents During filing will I need since I’ll be an hourly employee as well as the Graphic design DBA? Obviously the graphic work won’t be a steady regular income. I read that I will need to just attach schedule C 1040 to my personal taxes. Please guide me on this.

Either the CD version of Home & Business or the online version of Self-Employed. Other than one being on CD and the other on line, the only other difference between the two is the spelling. I find the CD version to be *significantly* more user friendly.

and 1099-misc forms and/or record of cash/check payments for your business to complete Sch C.

That's a bit misleading.  When you are self-employed the IRS expects you to keep your own records of all business income and expenses, and to use those records for completing the SCH C on your tax return. Those who pay your business for your graphics design services may or may not be required to send you a 1099-MISC. But just because you don't receive a 1099-MISC does not negate your requirement to still report the income. Hence, you keep your own business records.

For your first time dealing with SCH C, I *HIGHLY* *HIGHLY* recommend you use the CD version that you physically install on your computer. It is significantly more user friendly and much easier to navigate and deal with the many, many mistakes you *will* make your first time dealing with this SCH C stuff. It's not like you learn this through osmosis ya know. 🙂  If you use the online version for your first time dealing with this SCH C stuff, the frustration of having to go around your elbow to get to your thumb every time you find and need to fix an error *will* drive you up the wall.

[Critter · Accepted solution]

"Paying quarterly taxes" can be confusing since you only file one income tax per year ... what it is referring to is paying in quarterly ESTIMATED tax payments so you can avoid an underpayment penalty.  When you are a waged employee the taxes are withheld from each paycheck  ... when you are self employed you pay them yourself on a quarterly basis.

 

What are estimated taxes?

https://ttlc.intuit.com/replies/3301588

Do I need to make estimated tax payments to the IRS?

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 2015  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.)

https://ttlc.intuit.com/replies/3301891

 

How do I make estimated tax payments?

https://ttlc.intuit.com/replies/3301258

Can TurboTax calculate next year's federal estimated taxes?

https://ttlc.intuit.com/replies/4242911

Can TurboTax calculate the estimated payments for next year's state taxes?

https://ttlc.intuit.com/replies/3301735