Tax Planning/Newbie with questions!
I quit my job to file for disability. I was denied, obviously.
They told me that "Yes, you have restrictions, but you are still able to perform basic job functions."
I can not go back to my previous work because I absolutely struggle to do it. So I am looking for creative ways to make money.
Which leads me to you! You may not be able to help me, but maybe you could direct me to someone (or a website) that can!
Here is what I want to do:
I learned from a coworker of my mother's a way she makes extra cash during the month. Buy cheap goods in bulk, and sell them for more at flea markets, yard sales, and on ebay! (Also drop shipping)
So I have done some extensive research and reading, and have decided I do NOT want to drop shipping. I would like to just purchase the products on my own and sell them of my own accord. I have discovered dozens of websites that offer products for this purpose.
HOWEVER.. in order to purchase these products you must have an EIN.
So I obtained my very own EIN, as a sole proprietorship/individual thing.
My questions for you........
How will I file my taxes?
What forms do I use?
How do I know the amount of money I should save for taxes?
Will I even HAVE to file taxes?
Should I keep a separate bank account for this venture?
How much money will I have to earn in order to have to file taxes?
Is this considered entrepreneur, small business, etc?
Will my tax-related things be different if I sell on ebay vs. flea markets?
Umm.. and probably more questions that I can't think of right now. :(
I really hope you can help, I know this is long. If you can't, please direct me to some websites perhaps?? I don't really know what I'm looking for.. :)
THANK YOU!!! :)
Kayla - I will address your questions one at a time, but keep in mind that the tax code is VERY complicated and there are a wide variety of variables.
1. How will you file your taxes? You will file a Schedule C attached to your personal 1040 tax return.
2. What forms do you use? If you make a profit of over $400 from your business, in addition to Schedule C, you will also have Schedule SE for self-employment taxes.
3. How do you know the amount of money you should save for taxes? At a minimum, you will owe 15.3% (roughly) of your net income from the business for self-employment taxes. The amount of income taxes you will owe varies depending on a number of factors, including your filing status, your age, your total taxable income and a number of other variables.
4. Will you even have to file taxes? More than likely, the answer is yes.
5. Should you keep a separate bank account? The answer is that it is a good practice to do so, although not required for a sole proprietorship.
6. How much money will you have to earn to have to file taxes? Again, that depends on a number of factors. You may not have any earnings at all, but that doesn't mean you shouldn't file.
7. Is this considered entrepreneur, small business? Yes.
8. Will your tax-related things be different if you sell on eBay? Maybe. It sounds like you will have an inventory-based business which has another entire layer of complexity.
I suggest before you go into business that you consult with a local accountant so they can get you set up. And you might want to take some business courses at a local community college. It sounds like you need some assistance and you should not go into business unless and until you have a grasp on what is required or you will find that you have many surprises you didn't ever expect.
I hope this helps.