Self-employed sole proprietor with W2 income

[Looker]

Let's consider a hypothetical tax environment I may end up in 2021 and try to find legit answers.

Household: Single, no dependents

Business type: Software services

Source of income:

1. C2C contract as a sole proprietorships
2. W2 employment, employer withheld taxes

Expected total gross income:

1. $180 000 from sole proprietorships business
2. $130 000 from W2 employment

Retirement total contributions:

a) $45 000 (25%) to SEP simple from sole proprietorships income

b) nothing from W2

Questions:

1. Does pass-though 20% deductible applicable for remaining taxable $135000 from business regardless W2 taxable $130000?

2. What's the difference between 157000 and 207000 thresholds for single when we are talking about qualification for pass-though 20% deductible?

3. Now let's add additional information.  There is an accumulated $100 000 investment loss carried over from 2019. What is an additional deductible we can consider from both sources of income after 20% pass-through? 

4. What should I keep an eye on to minimize tax withholdings for the given example?

[Critter-3]

Which 2019 program did you use ?  Online or Downloaded ?  and which version ? 

[Looker]

Neither, I'm trying to understand outcomes if I end up in that situation

[Critter-3]

This is way to complicated for this kind of forum ... what you really need to do is talk to a local tax pro to get educated on the federal/state implications of your situation.    You could try using the Self Employed online program to do a few what if scenarios ... you will not be able to view anything more than the form 1040 without paying for the program ... just do NOT file it.

Or buy a downloaded Deluxe version (Basic if you don't need a state program) and what if till the cows come home ...  you can buy the 2019 download rather cheap right now if you buy it thru a reputable reseller like office depot or walmart.  

This is my mini version of  a tutorial  that should be in the downloaded program: 

Always remember to shut off the auto update function once you have filed your returns and do not do any updates unless you have safeguarded the PDF & .taxfiles to a removable storage unit for safekeeping.

 

 

What is Forms Mode?

Forms Mode lets you view and make changes to your tax forms "behind the scenes."

If you're adventurous, you can even prepare your return in Forms Mode, but we don't recommend it. You may miss obscure credits and deductions you qualify for, and you may forget to report things that will come back and haunt you later.

Forms Mode is exclusively available in the TurboTax CD/Download software. It is not available in TurboTax Online.

Related Information:

• Why would I use Forms Mode?
• How do I switch to Forms Mode in the TurboTax for Windows software?
• How do I switch to Forms Mode in the TurboTax for Mac software?

If you want to play around with different figures and tax scenarios without affecting your original return you can ….

• >>>In the TurboTax CD/Download software by creating a test copy: 
• 1.  Open your return in TurboTax. 
• 2.  From the File menu, choose Save As. 
• 3.  Give the copy a new name to distinguish it from the original (for example, by adding "Test" or "Example" to the file name). 
• 4. Click  Save. You are now safely working in the test copy and anything you do here will not affect the original. 
•  https://ttlc.intuit.com/questions/1900642-how-to-make-a-test-copy-of-your-return

• >>  use the WHAT IF tool: 
• - Click Forms Icon (upper right of screen) or Ctrl 2 (forms view) 
• - Click on the Open Form Icon 
• - In the “Type a form name.” area type What-If (with the dash), click on the name of the worksheet - click on Open Form 
• - You will see the worksheet on the right side of the screen; enter the information right into the form 
• - To get back to interview mode - click on the Step-by-Step Icon (upper right of screen) or Ctrl 1

It's always a good idea to make a backup copy of your tax data file, in case your original gets lost or corrupted. Here's how:

1. From the File menu in the upper-left corner of TurboTax, choose Save As (Windows) or Save (Mac).
2. Browse to where you want to save your backup.
   • Tip: If you're saving to a portable device, save it to your computer first to prevent data corruption. Then, after completing Step 4, copy or move the backup file to your device.
3. In the File name field, enter a name that will distinguish it from the original tax file (for example, add "Backup" or "Copy" to the file name)
4. Click Save and then close TurboTax.
5. Restart TurboTax and open the backup copy to make sure it's not corrupted. If you get an error, delete the backup and repeat these steps.

If you make changes to your original tax return file, repeat these steps to ensure your original and backup copies are in-synch.

Related Information:                             

• Retrieve a Tax File from a Portable Device
• What's the difference between the tax data file and the PDF file?

AND save it as a PDF so you have access to a copy even if you don’t have the program still installed and operational :

• How do I save my return as a PDF in the TurboTax software for Windows?
• How do I save my return as a PDF in the TurboTax software for Mac?

AND protect the files :

• How can I protect the tax files on my computer?

[Looker]

@Critter-3 , would Home Business 2019 version address my questions? 

[Critter-3]

Yes but you don't need to buy that version ... ALL of the downloaded versions handle ALL the same forms so just buy the Deluxe download/cd version ... Basic if you don't need state.   Save a few bucks and buy the cheaper version.  If you play with the ONLINE version (not recommended) then you must use the Self Employed version. 

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-Misc 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 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

How does my side job affect my taxes?

You’re considered self-employed—even if it’s just something you do on the side, like drive for Uber, babysit, or blog.

Your taxes are handled differently than when you’re an employee of a company.

As a self-employed individual you:

• will pay self-employment tax (because income tax and Social Security aren’t deducted from your pay)
• will get a 1099-MISC or 1099-K (unless you only accept cash or personal checks)
• file a Schedule C, Form 1040 (this is how you report business expense or loss of income)
• can deduct money you spent on work-related expenses (like mileage, home office expenses, and cell phone use)
• can estimate the taxes that are due and make quarterly estimated tax payments during the year

Get started by entering your income from self-employment. We’ll handle the rest, from creating the forms you need to reviewing work-related expenses that can help reduce your taxes.

Related Information:

• Where do I enter Schedule C?
• What self-employed expenses can I deduct?
• What is the self-employment tax?
• What is this new 20% business deduction?

Enter self-employed retirement in the Search box located in the upper right of the program screen.  Click on Jump to self-employed retirement … TurboTax will guide you on entering this information.