Visitor I

Self Employment

Ok so if I understand correctly I was told if I make more then $400 a yr I have to file taxes still due to Social Security and Disability.If I make more the $400 but less then $3000 how can I pay Social Security Disability? I don't want to have to pay one lump some. I wanna know how much to be putting away maybe a percentage? Like 5% on every dollar does this make since? I'm terrified to sale Avon as a stay at home mom and end up oweing IRS $600 last min during taxes. I wanna be prepared but still enjoy the money Im making.
1 Comment
Catalyst V

Self Employment

People in general are very good at complicating that which is really so simple. If you make more than $400 of self-employment income in one tax year then you are required to file a tax return. Period. The "less than" stuff does not figure into this requirement.  The TurboTax program figures everything for you at the federal level (and state level if your state taxes personal income and you purchase the state tax return module.)

Now the IRS has this complicated worksheet that you use to figure your required quarterly tax payments with. But in my opinion (and we all know what opinions are like.) it's an absolute waste of your time that will give you the same basic result as what I'm about to share with you. It's really simple.

If you send the IRS 20% of your gross business earnings each quarter, then come tax filing time you will be fine.  Now if you believe your total household income from all sources for the tax year will exceed $157,500 if filing single or $315,000 if filing married filing joint, then you should send the IRS 25% of your gross business earnings each quarter.

Now if you state taxes personal income, you will need to make quarterly payments to your state too. How much you send to the state each quarter would depend on the rate at which your specific state taxes earned income.

When you make your quarterly payments to the IRS, that 20% I'm suggesting includes *EVERYTHING*. That is, social security, Medicare, the whole works. The IRS will distribute appropriately to the Social Security Administrator and Medicare for credit to your account when you file the yearly tax return at tax time.

For federal taxes, you can make your quarterly payments online at http://www.irs.gov/directpay. For state taxes, you'll have to check with your state department of taxation or revenue website to see what your quarterly payment options are.