Tax question...

quick tax question…

If you are self employed, Is there a minimum to make beofre you would have to pay taxes… ?? if so, what is that number…

example…
If you are in the first stages of starting a company, and work full time in a different job, but you have made about $1000 on your own. Do you have to pay tax on that?

Wouldnt that fit under the "any additional income outside of your primary source" catagory on the tax return? I was under the assumption that you had to claim all money collected as income. Of course your business income would fall under different regulations depending on if your incorprotated or if you have a net income from the company or if the monies where reinvested in the company. Id wager only an accountant would be able to answer this with more knowledge of your business giongs on.

For most one-person outside businesses, you have to report all the money as income on Schedule C. You have to pay income tax on it, as well as social security tax if the total is greater than $400. The number gets transferred from Schedule C to the first page of your 1040.

The upside is that you can deduct business expenses on the Schedule C, even if you don’t itemize. Any money you paid out building the business is a legitimate expense (e.g., office supplies, phone calls, etc.). I fill it out for my writing and usually can reduce the income to nearly zero.

If you can legitimately declare a loss – more expenses than income – that’s allowed, too, though there are limits as to how often you can do this. IIRC, you need to make money 3 out of every 5 years to be eligible for the deductions, though a tax lawyer once told me that that was just a rule of thumb and you can continue to declare losses as long as you can prove to the IRA you were making a concerted effort to make a profit.

The Schedule C is not that hard to fill out (most tax prep software includes it). Another upside is that the IRS is not likely to get nasty about the deductions if the total amount of income is small – not worth their trouble and expense to audit you. They do, however, get very nasty when you don’t report income. So fill out the Schedule C and take every deduction you have a legitimate right to.