Forums: Discussions for entrepreneurs and small business.

I have a new business and have decided not to get LLC or incorporation on it due to the expected amount of sales it will get until going.

This leads me to my first business started that uses my ssn only.

This is a service only based business.

So when paying taxes at the year  I wont have double taxation correct as it uses my ssn?

So, say I did $50,000 and the percent is 35%, then I only need to pay $17,500 or so as personal income correct?

Or do I need to pay business taxes and personal income taxes even though it only uses my ssn?

So, $50k - 17.5 = $32.5 after business taxes

35% of $32.5k = 11,375 = $21,225

I know there are a lot of variables and that I need to get an accountant to look over the details, just would like to get a rough sketch idea so I know what I should typically have before going to an accountant, being a startup there are not a lot of funds to grow the business so a lot of the profit go back into the business.

Thanks for the help!

One – Look at a tax table at IRS.gov.  The entire income is not taxed at your highest rate.  Your income and expenses should go on Schedule C and will be reduced on the 1040 by your personal exception and the standard (or itemized) deduction.  This amount is important because you really should be sending the amount you’ll estimate each quarter.

Two – The same thing applies for state and local income taxes.

Three – your earnings will be subject to FICA taxes.  You’ll owe the employer AND the employee part – BUT you get a credit for 50% (it actually works out to be a little less than half).

The thing to remember is that if you have not been sending the quarterly taxes in, you MAY have a big tax bill and penalty in April.  One way to reduce that is to pay what you think you will owe for the year with the last quarterly payment due Jan 15, 2011 (you just missed the Sept 15th payment).   If you owe less than an additional $1k in April 2011, there will no penalty so I would pay at least enough to owe less than $1k in April $1k. 

This all gets a little more complicated if you also have w-2 income for the year as there are a few more numbers to track but everything above still applies, you just have to add that income (and taxes paid).

Ken is dead on. It's a lot more complex than that. You'll want someone to lay everything of yours onto the table to come up with a plan of action.