Federal Employment Tax Payments
April 5th, 2007
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Question: Self Employed Business Tax Question….?
I started a side business this year (last three months of the year) that had income of $19,500 and expenses of $20,000 which gives me a small net loss for the year. Do I have to pay any federal taxes or social security or self employment taxes or any tax for that matter even though I have a net loss for the year? I am worried that I might need to make an estimated tax payment next week. please help….
Answer: If this is your only income you are not required to file a return. If however any of that money was or is going to be reported on a 1099 MISC by the person who paid you than you may wish to file to avoid the IRS sending you a request for information regarding the 1099 MISC which will initially state that you owe taxes on that amount without regard to your expenses.
If you had other income which would require you to file and you have no tax liability or very little it would be a good idea to file a Schedule C with this business but don't use all of the expenses and declare a gain of something less than $400. This will give you a year of profit to show that this is a legitimate business.
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The Legislature's recent expansion of the interest and dividends tax will undermine the state's ability to attract small business owners and the jobs they create.
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