Filing taxes with "Schedule C"

[CJsoccerchic]

I was just at the tax office recently to get a tax clearance for my new line of work and they gave me all these forms and told me that I have to do a "schedule C" come this next April. Can anybody summerize what in the world this is and how to fill it out easily and effectively?

[jmjj215]

It's a sheet used to report business income when you're operating as a sole proprietorship. It's basically an income statement. It's then carried over to the front of your 1040 into your Gross Income.

The best way to use it effectively is to make sure you track all of your expenses meticulously. Keep receipts. Keep a separate account for business transactions. And if you're making over $600 per quarter make sure you're filing quarterlies.

[CJsoccerchic]

Ok I'll probably be making more then 600 per quarter. So what kinds of receipts am I keeping...? ALL of them? Food for my house, dinner with clients, gas, clothes? Or only select few?
And keeping a seperate account for the buisness transactionbs makes things easier?

[jmjj215]

Definitely keep a separate account for your business expenses. It makes accounting MUCH easier. Keep all business related receipts (so you can deduct them later). You've got to treat it like a full-blown business (because it is one )

Now, since you're making > 600 per quarter (or will be), make sure you withhold on yourself 25% of your profit so that each quarter you can file to the IRS those withholdings. Most small business really teeter on the edge or go under b/c they don't keep up on their taxes.

If you're also employed, you could increase your withholdings substantially there and file your quarterlies automatically by having the employer do it That's what I do.

[CJsoccerchic]

You have been most helpful (so I'll probably be asking you alot of questions...)
Why should I withhold myself 25% profit.... How does that help or benefit me?

Thanks for being so helpful!!!

[terry1156]

Do you have a sperate space in your house used exclusively for the business where you are making the money? If not, you will want to do so asap. by making an exclusive space, you can then deduct that % from your profits. For example, if you set up a space of 10%, you can deduct 10% of you mortgage payment (or rent) against any profits you make. also 10% of all your utilities.

The 25% of profit you need to send into the IRS on a quartely basis to cover your taxes...if you don't, then you will get charged late fees.

[jeffrey]

This might be helpful <A HREF="http://www.savingadvice.com/forums/showthread.php?t=41">Home Business and taxes</A>

[CJsoccerchic]

I would say that about 20% of the house would be dedicated to my work.

25%!!!!!!!!!! I have topay 25% of my profit for taxes. (i don't pay attentiont o how much I pay NOW) but 25% sounds like a lot. Are the odds in my favor that I'll get a decent tax refund at the end of the year?
Or what are the considered quarterly? March - June - September - December?