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I need serious help! Does anyone know how to file taxes if you are self employed?

by pheonix44
22 replies
I have made a nice amount of money writing for others on the forum. So for the first time I have to file taxes on this income. The problem is I do not know how to do it. What I find on the internet does not give clear instructions and I walk away confused. When I had a regular job it was easy, now I am going nuts. Can anyone please help me? I would appreciate it.
#employed #file #serious #taxes
  • Profile picture of the author marketingva
    I use TurboTax. I started using this several years ago as a self employed person and it walks you through every step.

    Bonnie
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  • Profile picture of the author chasnsx
    +1 on TurboTax. Just go to their site, and download the business version, and pay the price -- it is worth it.
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    • Profile picture of the author Marc Quarles
      Another +1 for Turbotax - couldn't live without it!
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  • Profile picture of the author agc
    Turbotax FTW. You don't need any special or upgraded edition unless you get into funky crap like accruals and depreciation or rental properties or royalties. Straight up "gee I made some money on the side" just goes on your 1040 as a Schedule C.

    Complete a Schedule C (for self employment income). If you make less than like 90k, you'll have to pay fica tax, plus your regular fed + state + local taxes.

    Aggregate your expenses into the categories they provide, even if they ARE retarded categories. You DID keep your expense receipts, right?

    Anything you bought (that you want to expense) that's generally supposed to be "depreciated" (like a computer, furniture, generally capital equipment type), you can take the 179 election on it and write the whole thing off this year. Your computers, desk, chair, crap like that. Last time I checked it was up to $17,500 a year. That's 17,500 of peripherally business related stuff that you can buy and expense w/o depreciating it over multiple years.

    My advice, though I'm not a cpa, is to skip anything related to home office expense (unless you rent, and have a separate room for an office). If you own your home, you end up having to recapture whatever you wrote off when you sell the house. Yes, it recaptures as capital gain (15%) while you wrote it off against income (fed + state + local + fica), but is it really worth the hassle? The paperwork later could easily waste days of your time.

    At least if you can't stand dealing with taxes so all your papers are just kinda in a big huge pile, like mine.
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    • Profile picture of the author kindsvater
      Originally Posted by agc View Post

      My advice, though I'm not a cpa, is to skip anything related to home office expense (unless you rent, and have a separate room for an office). If you own your home, you end up having to recapture whatever you wrote off when you sell the house. Yes, it recaptures as capital gain (15%) while you wrote it off against income (fed + state + local + fica)...
      IMHO, always talk to your CPA about your personal situation, but this could be a serious financial mistake.

      First, you are incorrect that "anything" written-off is recaptured. Only depreciation is recaptured.

      Second, the IRS applies the recapture rule if you could have, but did not take the deduction.

      Here is what the IRS says on the issue:

      Depreciation & Recapture

      Again, get personal advice. But you may never sell your home. Or if you do in 20 years who knows if a depreciation recapture will still be required.

      .
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      • Profile picture of the author agc
        Originally Posted by kindsvater View Post


        First, you are incorrect that "anything" written-off is recaptured. Only depreciation is recaptured.

        Second, the IRS applies the recapture rule if you could have, but did not take the deduction.
        I meant depreciation.

        But the they'll screw you even if you didn't try to screw them, part? WTF?

        I swear, the day I make enough money it's all going into trusts. God I do so hate the IRS. Even when you try to do the right thing they still do everything they can screw you.

        smdh.
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  • Profile picture of the author agc
    btw, once you start making side money consistently... open a business checking account (joe schmo dba/ schmokola enterprises) and move your business related stuff to the business name. your internet, maybe your cell phone if you use it mostly for business, ALL of your paypal expenses for WSO stuff, your domain regitrations... all of it.
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  • Profile picture of the author pheonix44
    Is the 1040 form the only form I have to file? I have never done this before, I always had the w-2 and did it using online software. I keep getting told different things and it is getting overwhelming.
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  • Profile picture of the author agc
    You will have at a minimum, a 1040 and a Schedule C. If you bought big ticket stuff (per above) you'll have a 179.

    And don't forget to include the 50 bucks for TurboTax in your 2012 expenses!
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  • Profile picture of the author pheonix44
    Is turbo tax really that good. I am seeing that it cost 100.00? I am looking at it and it seems to have everything I would need, including assistance.
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    • Profile picture of the author agc
      Originally Posted by pheonix44 View Post

      Is turbo tax really that good. I am seeing that it cost 100.00? I am looking at it and it seems to have everything I would need, including assistance.
      The only thing turbotax sucks at is telling you that all you need is the basic version. Imagine that.

      Walmart.com: TurboTax Deluxe Federal + E-file + State 2011: Computers
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  • Profile picture of the author pheonix44
    I was referring to the the Home and Business edition. I see that is $94.00, which I will gladly pay if I feel it is worth it.
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  • Profile picture of the author athenajw
    Hi guys,
    I am a CPA and unless you are making huge bucks nearly everything you do/earn/spend will be in Turbotax home & Business. If you ARE making huge bucks then find a tax accountant and they can help you optimize your filing. I pretty much agree with everything agc said in Post #5 except that figuring the home office deduction really isn't that hard and TT walks you through it. BTW, be SURE to deduct the cost of all the bright shiny objects, training courses, software, etc. that you bought to learn and operate your online business. Sadly, for me that is a big number for 2011!

    Later, when you are making good money, you can get fancy and form an LLC or SubChapter S corporation and save even more on your taxes. But in the meantime, as agc suggests, a dba is just fine. Actually you don't even have to have that if you don't want to.

    Good luck to all. I'm actually developing a guide for just this subject.

    Julia
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    • Profile picture of the author TopKat22
      You got answers above, but just in case you want to do this yourself.

      Here is the 1040 you can fill out online from the IRS website.

      http://www.irs.gov/pub/irs-pdf/f1040.pdf

      Here are the instructions:
      http://www.irs.gov/pub/irs-pdf/i1040gi.pdf

      Here is the Schedule C for the business income/loss
      http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

      Here are the instructions for Schedule C
      http://www.irs.gov/pub/irs-pdf/i1040sc.pdf

      Form for self imployment taxes
      http://www.irs.gov/pub/irs-pdf/f1040sse.pdf

      and SE tax instructions
      http://www.irs.gov/pub/irs-pdf/i1040sse.pdf

      These are all pdf files that you can fill in the blanks on your computer, then save them to file, print them out and mail them or file electronically.

      If you need any other forms or instructions for this or any earlier year, get them here
      Forms and Publications


      The instructions for self employment tax.
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    • Profile picture of the author agc
      Originally Posted by athenajw View Post

      Hi guys,
      I am a CPA and unless you are making huge bucks nearly everything you do/earn/spend will be in Turbotax home & Business. If you ARE making huge bucks then find a tax accountant and they can help you optimize your filing. I pretty much agree with everything agc said in Post #5 except that figuring the home office deduction really isn't that hard and TT walks you through it. BTW, be SURE to deduct the cost of all the bright shiny objects, training courses, software, etc. that you bought to learn and operate your online business. Sadly, for me that is a big number for 2011!

      Later, when you are making good money, you can get fancy and form an LLC or SubChapter S corporation and save even more on your taxes. But in the meantime, as agc suggests, a dba is just fine. Actually you don't even have to have that if you don't want to.

      Good luck to all. I'm actually developing an ebook on just this subject.

      Julia
      Julia, what does he need that's not in the basic version? I honestly have never needed the "business" version, and I've been doing this for years.
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      • Profile picture of the author athenajw
        To be honest, agc, I've never checked into the basic version, LOL. You may be entirely correct. That also may be why you never bothered with the home office deduction if the basic version didn't make it super simple like the Home & Business does. Also, I think Turbotax offers some sort of total online solution that may be even less expensive but haven't ever checked it out.

        Note to Phoenix44--if you even have your credit card or bank statements to show what you paid for youe stuff that should work. If you paid cash and have NO records, just do the best you can and hope. If you are nervous about it, TT even offers some kind of "Audit insurance" where they'll represent you in an audit, although they certainly can't insure you against the consequences of outright fraud, etc.

        Julia
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    • Profile picture of the author kindsvater
      Originally Posted by athenajw View Post

      unless you are making huge bucks nearly everything you do/earn/spend will be in Turbotax home & Business.... figuring the home office deduction really isn't that hard and TT walks you through it.
      No disrespect Julia, but I mostly disagree.

      If you are relying on TurboTax to figure your home office deduction you could be losing thousands in deductions.

      TurboTax also misses some major opportunities business owners can use to significantly reduce their taxes, and you don't have to be making "huge bucks" to make use of them.

      TurboTax is definitely a great program. But you get what you pay for and it is a mistake to solely rely on TurboTax (and the courts have said tough luck if you rely on TurboTax and make a mistake).

      Here is a brief report showing how the TurboTax "walk through" of the home office deduction is incomplete and could be costing you money (more than the cost of TT):

      http://irsblackbook.com/specialrepor...homeoffice.pdf

      Remember to send me a thank you 'bonus' if this saves you some bucks this year, next year, the year after ...

      .
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  • Profile picture of the author pheonix44
    Seeing as how this is my first time doing this I do not have any of the receipts for equipment I bought. I do have all of my earnings information as it is all through paypal.
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    • Profile picture of the author agc
      Originally Posted by pheonix44 View Post

      Seeing as how this is my first time doing this I do not have any of the receipts for equipment I bought. I do have all of my earnings information as it is all through paypal.
      I do a terrible job with receipts. But I keep a separate checking / debit card / paypal that I use for ANYTHING even remotely business related.

      First of the year I just add up and categorize my statements. (If it's on the business statement then I know I have a receipt in the big ol' pile. somewhere).

      In your case, go through your checking, visa and paypal statements and just add up anything business related.

      Oh, and dont be shy about making a cashier ring up business stuff separate from personal stuff and charge each to the right account. It makes it a LOT less work when you don't have to divide up receipts. Really, who has time for that crap?
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  • Profile picture of the author pheonix44
    All of this is good advice. I am going to go with the turbo tax home and business package. I think I will get an offline business bank account this year, it seems like it would be easier this way.
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  • Profile picture of the author Martin richards
    Have you tried hiring an accountant? they might be able to help you with that.
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  • Profile picture of the author samuraig
    Turbo Tax! Use the self employed business option. I just filed mine, it's maybe less than $99 right now + however much for your state filing.

    It's easy to walk through and fill everything out and they have a knowledgebase when you have questions.
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