Unofficial tax talk - Sales tax, quarterly tax, income tax- a breakdown, Paul & Cinnamon
Sales, Income, Quarterly - oh my!
We know there is a lot of information out there on how to do your business taxes. We also know we aren't tax professionals.
However, we decided to give you a quick guide on the three main tax terms from our perspective (and why they're important)! Don't worry, we're using the simplest terms possible.
As a business owner, you most likely need to be charging sales tax. Each state is different so make sure you check with your state to see what you need to be charging sales tax on. If you collect the sales tax, you do have to give it back to the state. There are many instances that don’t require sales tax, like services or digital images, so if you don’t charge it, you don’t pay it.
Your income tax is the money you pay based on your income minus your expenses. Save all of your receipts to categorize your purchases for your business (remember though, not everything is actually deductible). Using Quickbooks, or something similar, will help you determine what may be deductible and what is not. You have about two years to turn a profit before it might become an issue with the IRS. Again, talk with a CPA about your own taxes. As a self-employed business owner, you have got to keep up with how much you’ve made, spent, and what you owe each year. If you’re filing as a Sole Prop, you’ll be filing your business with your personal, so even if your business doesn’t owe, your personal might, but your deductions all go together which is nice too.
This is the first year we’ve been paying quarterly taxes with Cinnamon’s business. What this means is that you are paying your quarterly taxes ahead of time so you don’t get hit at the end of the year. It is an estimation of what you think you will owe. When you go to file your yearly and you’ve been paying your quarterly, you may end up owing only a little bit more or having already overpaid the amount due (wouldn’t that be nice!)
That's it! Short, sweet, and simple!
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