What about taxes?

Posted by Offer Tsuriel on October 16, 2009

It is very important to understand what kind of taxes you should pay and why.

There are four basic taxes that you should be aware of:

• Income Tax
• Self-Employment Tax
• Employment Taxes
• Excise Tax

Income Tax

You have to file an Income Tax return if your gross income was more then $8950. Even if your earnings were less than that from your business, you may still have to file a 1040 if you meet any of the criteria listing in the 1040 instruction booklet.

If you expect to owe more than $1,000 in Income Tax, you may have to pay Estimated Taxes. There are four ways to pay estimated taxes:

Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes and awards.

For more information on Estimated Taxes, see the IRS website

 

 

Self-Employment Tax

Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners.

You figure SE tax yourself using Schedule SE (Form 1040). Social security and Medicare taxes of most wage earners are figured by their employers. Also you can deduct half of your SE tax in figuring your adjusted gross income. Wage earners cannot deduct social security and Medicare taxes.

You can find more information on SE taxes at the IRS website.

Employment Tax

In general, you must deposit income tax withheld, both the employer and employee Social Security and Medicare taxes (minus any advance EIC payments), and FUTA tax by depositing electronically, mailing or delivering a check, money order, or cash to a financial institution that is an authorized depositary for federal taxes using Form 8109-B. You can also make your deposits using the Electronic Federal Tax Payment System.

Here is an article with specifics and tips on Employment taxes.

Excise Tax

Excise taxes are taxes paid when purchases are made on a specific good, such as gasoline. Excise taxes are often included in the price of the product. There are also excise taxes on activities, such as on wagering or on highway usage by trucks. Excise Tax has several general excise tax programs. One of the major components of the excise program is motor fuel.

For a list of businesses that apply, see the IRS website:
http://www.irs.gov/publications/p510/index.html

A free Small Business Tax Kit is available from the IRS. Their Small Business and Self-Employed Tax Center offers advice, publications and links to useful information. They also offer a Tax Calendar which tells you when to file returns and make tax payments.

You should also be aware that the laws vary by state and by industry, so it is highly recommended that you consult a tax advisor in your area. You can get information on local zoning regulations from your city hall, county court, or state department of taxation and finance.

This post was partialy quoted from the following post on the http://blog.2work-at-home.com

A Practical Guide To Starting A Work At Home Business