Question
First year in business for myself, filing schedule c...estimated taxes?
I didnt have a job last year and this year i started doing phone psychic work from home. I'm going to make probably under 10,000 in total for the year (possibly even less; my income from it fluctuates alot monthly, depending on how many people i consult) I know im probably going to owe about 1400-1500 or something like that and I'll obviously begin sending in estimated payments based on this years income beginning next april. But I'm worried that I misread the rules for estimated taxes and may owe penalties....I also heard that filing schedule c's tend to get audited alot. I have barely any deductions (mostly a small amount of paypal fees), what're the odds that I'll get audited? I'm new to all this so I just want to get a feel for it because I'm a bad worrier. Thank you for replying and your information but I'm asking if I'm going to be penalized for not paying estimated taxes this year (it's already too late to do so considering I started working at the beginning of the year) if I made no money last year... Thank you tax lady... That's the exact info I wanted. I've been reading alot online about schedule cs being audited and I think it made me really paranoid thnking of having to sit down And go over my records with an IRS agent. Even though I've kept good records, it's a scary thought
1 month ago - 3 answers
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If you owe more than $1,000 at filing time you will be subject to penalties for underpayment of estimated taxes. It won't be an earth-shattering amount on a $1,500 tax debt, generally less than $100 and probably a lot less. Not having much in the way of business expenses does not raise any red flags with the IRS per se unless you are also claiming the EIC and your expenses are lower than the industry average for your business and the lack of business expenses increases the amount of your EIC. That situation IS an audit flag. That said, as long as you have kept good business records you have nothing to fear from an IRS audit.
1 month ago
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Every month give about 25% of your estimated profit. 10% for personal income tax and 15% self employment tax. Go to the irs.gov and search fo th market segment specialization program. This will tell you what kind of expenses are common to your business. In your schedule C make sure you accurately research your business code (this would be in the C section of the 1040 instruction). Keep receipts and record the who what why and where. Record the events close to when it occurred. As long as the expense are not lavis and extravagant, you'll be ok
by Gerardo D, EA- 1 month ago
FYI, there is a 1 year grace period on the estimated taxes. If you didn't pay any tax in 2008, you can't be penalized in 2009 for not making any payments. The risk you have is failing to file on time and not having the money to pay by 4/15/2010. At 24 with no dependents, you don't qualify for EIC. At 25, you could. so 25 is the year you want to either be successful (making more than $12K) or have meticulous records.
by the tax lady- 1 month ago