Taxes

[Szafranman]

I was wondering if anyone here is doing business in Illinois. If so I have a few questions about taxes. I am considering establishing an single member LLC for the liability protection but to maintain self employment taxes. Do you pay Estimated taxes and Self employment taxes or is there another route. I find it hard to estimate my total gross revenue for the year when I find myself picking up random jobs that pay several thousand dollars or just a few dollars each year. I am not exactly sure if there is one answer to this, but basically I am poking around to see how the vets have it established as far as business entity and taxes that are paid. Any advice would be greatly appreciated.

[Whitey4]

I'm not sure about your state issues, but for federal taxes you can make quarterly payments and stay out of trouble, but I think you need to talk to an accountant.

[DBE022576]

Normally you will need to pay in either 95% of the current years taxes or 100% of last years total taxes to avoid an underpayment penalty. If you will be jumping into this full time and buying new equipment, you could possibly section 179 expense the cost of equipment to reduce your profit and hence, your self-employment taxes and income taxes. Otherwise, if you want to cover the 100% of last years, just divide that amount from last years 1040 into 4 and mail it to the IRS (and basically the same thing for your state) on 4/15, 7/15, 10/15, & 01/15/10. Since April has already past and your probably had taxes held out of your paycheck up until now, compare that amount of Federal withholdings to the 1st qtr's payment. If it's more, great; if not, add it to the next payment. If you want to shoot for 95% of this year's taxes, then you should plan on 10%-15% in income taxes (after deductions, etc) and 15.3% for self-employment taxes. This will be calculated on your net profit. So for a rough estimate, take your gross profit and subtract mileage (.50 / mile), expenses, supplies, etc from each job and save it until the next quarter's payment is due. All of this info should get you on track but nothing will replace either the correct software (with someone who knows what they are doing) or a tax professional that will be taking care or your bookwork. You should ask around to some of the small businesses in your area to get a recommendation on a bookkeeper or accountant. You may not need an accountant but you have to make that decision.

[Szafranman]

Thanks for the informative response. I do have a access to an accountant. My cousin has been CPA for 15+ years but I wanted to know a little something before approaching him so I didn't look like a complete idiot, and your response has helped. Much appreciated.