Author Topic: Small business success! How do I learn about taxes?  (Read 2104 times)

MissStache

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Small business success! How do I learn about taxes?
« on: February 27, 2014, 09:08:47 AM »
Hello Mustachians!

I have a small Etsy business.  Well, it has been small for the past two years or so, then this winter I stumbled into a market that I didn't realize was untapped and now I'm doing astonishingly well.  In the past 30 days my shop has brought in about $2500, and about $2000 is pure profit*.  I'm stunned, frankly.  Before, it was a good month if I made $100.  Things aren't showing any signs of slowing down, so I'm entering a new realm of business-y things that I don't know anything about. 

I've registered my business with the state and I've been paying my state sales taxes (which are miniscule), but with income like this I know I need to start paying attention to estimated federal and state income taxes as well.  I'm feeling a bit lost and overwhelmed.  Can anyone recommend good books or websites that have information about this process?

*and thanks to my new-found mustacianism, for the first time in my life I am thinking to myself "what in the hell do I do with all this money?!"

bacchi

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Re: Small business success! How do I learn about taxes?
« Reply #1 on: February 27, 2014, 09:34:09 AM »
This is self-employment income, unless you're now a "corporation." Either way, you'll need to pay both sides of the SS and medicare tax, which is 15.3% total. You can go to eftps.gov and pay it each quarter (the first payment for 2014 income is 4/15).

For federal income tax, you'll be ok re:penalties if you pay in 100% of what you paid last year. Your day job should satisfy that. Use this year's tax program to get a better estimate of what you'll be paying next year and send that in each quarter via eftps.

I would also seriously consider opening a solo 401k at Vanguard or Fidelity. Even if you have a 401k at work, you can "profit share" your earnings.

SunshineGirl

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Re: Small business success! How do I learn about taxes?
« Reply #2 on: February 27, 2014, 10:08:23 AM »
I don't have a good resource to refer you to, except in general for you to peruse Amazon for well-rated books, AND to try and find a good accountant in your city that you could pay for an hour of her time for advice.

My earnings are quite sporatic, and I've gotten in the habit of just taking 50% of whatever I earn and putting it in a savings account earmarked for taxes. For your first year, you won't have any penalties for not paying quarterlies, but in future years, you'll need to or face paying the (small) penalties. No matter what, you'll always have to pay the FICA tax, but you should be able to shelter a lot of the rest in a Solo 401K, which is what I use for my business earnings.

The TurboTax website has lots of good information with really clear wording that I have used in the past as I've studied for my VITA tax volunteer work.

tat96

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Re: Small business success! How do I learn about taxes?
« Reply #3 on: February 27, 2014, 10:37:15 AM »
Congrats for doing astonishingly well!!  I believe that getting a book from Amazon in conjunction with the IRS website are probably your best initial bet to figure out what you owe based on how your company is structured (LLC, Sole Proprietor, etc.).  Then I would look into maybe using a program like Quickbooks to track your business income/expenses.  Many of these programs have a built in tax feature that will do a lot of the work for you (not an excuse for not understanding the taxes though).

If you still want to take it a step further you can always go see a local CPA who can help you out. 

My advice:  Ensure that you do your research and track your income/expenses very well.  Most people screw up the first part then have no idea what numbers to report for tax purposes and get into a lot of trouble. 
 

Weedy Acres

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Re: Small business success! How do I learn about taxes?
« Reply #4 on: February 27, 2014, 12:07:13 PM »
If you want some free advice, find your local SCORE chapter (score.org) and ask for a free consultation.  They've got great resources that can advise you on how to manage your cash and track your finances.