paying taxes

Discussion in 'Business Operations' started by Kingbman1, Dec 20, 2003.

  1. Kingbman1

    Kingbman1 LawnSite Member
    Posts: 176

    How much money would you have to make before having to pay taxes.

    Say I had a 1 man part time business and did strictly mowing and made 3,500 a year in cash. Would i have to pay taxes. I am only 17, would my dad have to pay taxes?? please help!
     
  2. Green in Idaho

    Green in Idaho LawnSite Senior Member
    from Idaho
    Posts: 833

    Kingbman,
    You would file a tax return claiming the $3,500 as income on a Schedule C which flows the income to your Form 1040.
    Then you subtract your standard deduction ($4,750 for 2003) and your taxable income becomes zero, therefore no **income** tax would be due.

    However you are still subject to the **self-employment** tax on your income. This is the same as Social Secutity/Medicare tax (aka FICA) tax that EVERYONE pays as an employee. The equations works as

    Net profit
    x .9235
    x .153

    on $3,500 it would be $495 of taxes. Notice that is 14.2% of your net profit.

    Also notice that in your situation as a dependent of a parent you can earn up to $4,750 without paying federal INCOME tax, but self-employment tax is assessed on all self-employment income over $400 in a year.

    No, your dad would not have to pay the tax on his return. It goes on your own return.

    R. you do get to subtract all your expenses from your gross earnings to arrive at the net profit. So if that 3500 is the total of what you earned this year you probably have expenses to subtract- providing you kept the receipts.

    Good luck with it.
     

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