OT: Anyone have advice for self-employment and taxes?

[AvasMama]

Both my DH and I are now 100% self-employed, which is great in many ways, but so confusing when it comes to taxes. I know we need to start paying quarterly taxes, but I have no idea how to figure out how much we owe or how to file. The new "user-friendly" IRS site is super-confusing.

Any advice from other self-employed mamas? I also suspect I will be needing an accountant come tax time. Any advice on how to find a reliable one?

Robyn & Ava

[lisaE]

The first year is very difficult. You should pay at least 100%-110% of the prior year's tax in order to avoid penalties. The remaining estimates is due January 15 and should be filed with form 1040ES.

Keep in mind that you will be subject to self imployment tax, as well as income tax on all your earnings.

As far as finding an accountant, just don't go to a service like HR block, Jackson Hewitt, etc. Most of those folks are not accountants! You need a licensed CPA- check with your state board's website to find who has a current license.

All this info comes from DH who is a CPA. What state do you live in? He is accepting new clients if you happen to live in the Dallas area ;)

HTH!

[peanut4us]

You MUST have an excellent accountant. Holy cats. The first year that Scott was self-employed, we tried to figure out our taxes ourselves and thought we owed over $6000. Yeesh! We got a recommendation for an accountant from a friend we trust who is self employed. love this accountant. That year, we paid just under $2000 for taxes and opened a SEP IRA to help offset the taxes. That accountant was the best $400 we ever spent!

I would contact an accountant sometime soon ebcause you will probably be subject to quarterly taxes, and you don't want to get fined for not paying them.

[Momof3Labs]

Don't wait until year-end - get a good accountant NOW. They will help you set up your books so that everything falls into place more easily at tax time, and can help you calculate your quarterly taxes, too.

[ohiomom]

$400? Is anyone else here paying in that ballpark for their self-employment/business taxes for a very small business??? If so we are WAY overpaying...

I agree the 1st yr is the worst to get it figured out. I still can't figure out the whole depreciation thing...

Nicole's Mom 7/03

[sidmand]

I have a very small home business (just me and sometimes one other person). We pay about $1,000 to get our taxes done (including taxes for our family). We do have a couple of other odd situations going on, but 've paid anywhere from $200 to $2800! The $2800 was way out of whack and we didn't know he was going to do that until it was already done (and we learn from our mistakes!) $1,000 to me seems reasonable for all the work he is doing and the knowledge the accountant has of things that wouldn't even occur to me.

As the other posters have said, estimated taxes are important. Our accountant takes what we paid last year and divides by four and I know one of our estimated payments (can't remember if it's state or federal) is supposed to be done in December for some reason. And remember, the fee you pay an accountant to figure out the business part of the taxes is also deductible as a business expense.

And there is the self-employment tax which threw me for a loop the first year. I belive if you make less than the year before, as long as you pay 100% of what you paid the year before you won't be penalized and if you make more, as long as you pay 110% of what you paid the year before you wont' be penalized, but I'm not positive on that information.

And do take advantage of the SEP IRA. It's a great way to save and to have a deduction.

Good luck!

Debbie