Accounting / Tax Help

[LERecords]

soo.. i have a tax question for small business and i am hoping someone on here is an accountant that could help :thumbup:

I have a small sole proprietor business and I have to pay self employment and income taxes on (and a wide range of other taxes) and I do not know how to calculate my final income. Here is an example to help understand this question. please note that i do not have cost of good sold or anything like that.

Final profit after sales taxes: $100

Self employment tax: I understand to take the tax from the $100. After that tax i would have approx $93 (simple math)

Income tax: for my income tax, do i calculate it off the $100 profit, or the $93?

thanks in advance!!! :thumbup:

 

[trepetti]

I use TurboTax. Really helpful and the cost is tax deductible.

 

[TownsendsFJR1300]

I use TurboTax. Really helpful and the cost is tax deductible.

+1 on the above.

I am retired but do the helmet lock brackets (for BMW's, FJR's, etc) as a side business. My distributor in NC (USA), Pirates Lair) needs invoices, etc.

With the combo "home/business" in Turbo tax, it'll walk you thru ALL your expenses, deductions, mileage deductions, tools, office supplies, postage, etc. It'll figure out all those deductions and more, and calculate the total. As a side note, I can't give you a speciific profit for each bracket. I may buy a 4' x 10' sheet of aluminum every 3-4 years. That sheet gets written off for that that year. Same for say buying nuts and bolts, if I order $50.00 in bolts, they may last say 2 years, but that invoise is written off that year.

Under that particular program, it figures in my retiement income, what I paid in taxes there, then a separate section for the business.

All that and numerous other deductions are all put together for a final number.

Hope that helps...

 

[LERecords]

well.. I appreciate the turbo tax idea, but honestly I am not looking for software. I Have Quick books currently, but I was looking more for an answer so that I can work up projection sheets to calculate profit, taxes, etc. The original question is literally the last thing I need to know about taxes (at least I think).

thanks for the Turbotax tip!!

 

[2007Fizzer]

+1 on TurboTax also. I used TTx Basic to prepare 5 different family income tax returns this year, and e-filed them all. I'm a retired CPA, but with a very narrow specialty other than income taxes. However, I can help out a bit. When you compute your income subject to Federal tax, the first step is to compute the Federal self-employment tax on that income (use Federal Schedule SE to do this; it's online at the IRS site - there are all kinds of minimum amounts not subject to tax, and only part of your income is subject to SE tax, etc., etc.). Then when you compute your "net income subject to Federal income tax", a portion of your self-employment tax is actually deductible, on line 27 of Federal Form 1040, before the Federal income tax is computed.

If this seems like doublespeak, it's not. Our Federal income tax laws and rules are pretty complex (just like this "interaction" between the Federal self-employment tax and the Federal income tax), and many items of income and deduction are affected by your level of income, or lack thereof. That's why so many of us use TurboTax or other similar tax preparation software. Frankly, so long as your income is below certain limits, you can use many different kinds of tax preparation software, on-line, for FREE! (I think the limit this year is about $58,000, but go to the IRS web site and they'll guide you to various types of software which may be free to use.)

Finally, if it gets too late to get all this accomplished, just ask the IRS for an extension of time to file your 2013 Federal income tax return (google that form on the IRS web site). But make sure you PAY any tax you estimate to be due by 4/15/2014; there are substantial penalties for late payment - even if you have an extension of time to file the return.

Also, you may find a nearby FZ6 rider that would be willing to help you with these problems in exchange for some maintenance help. Good luck.

 

[mnuttall87]

I'm a CPA, but don't usually deal with tax...but let me see if I can help:

"Self-employment tax is computed on Form 1040, Schedule SE (PDF), Self-Employment Tax. When figuring your adjusted gross income on Form 1040 (PDF), you can deduct one-half of the self-employment tax. This deduction is calculated on Schedule SE."

From the IRS website: Tax Topics - Topic 554 Self-Employment Tax

So it sounds like if you SE tax was $7 (making you run down to $93 in your example), you would calculate your actual tax based on $100 - 1/2 SE Tax, giving you a new AGI of $96.5.

 

[LERecords]

So it sounds like if you SE tax was $7 (making you run down to $93 in your example), you would calculate your actual tax based on $100 - 1/2 SE Tax, giving you a new AGI of $96.5.

yes!! that is what i was looking for. I filled out my SE tax yesterday and that is basically the way they explained it. I just want to make sure that I was reading / understanding it correctly. Then from the New AGI, I can calculate out what my expected taxes will be!!

I was looking for this info to not only due taxes, but to put it into my business cost calculation excel sheet. I tend to do a little over analysis, but I would rather know where all my money is going. Thanks for the help!! :thumbup: