Paying Estimated Taxes - Very Small Business

[kslagerman]

Hello,

I am in my second year of self employment in a relatively small business as a commercial photographer and designer based in Sacramento, CA.

I have fairly limited funds and therefore have opted to try to educate myself about taxes and everything else. I used Turbo Tax for my 2008 filing and Microsoft Office Accounting 2008 and that has seemed to work pretty well in my first year of operation.

I am most concerned with paying my quarterly estimated taxes and self employment tax.

I have not had much luck in trying to understand how to do this. I even went into two H&R Block locations in my city and they had no clue about my specific situation.

I find estimated taxes confusing at this point because I am only in my second year of business and I was not profitable in 2008 so I have no idea what to base my quarterly estimates on when there is so little history to do so. I do plan to be profitable and liable for more than $1000 this year. I see on the estimated tax forms for 2009 that there is no need to pay estimated taxes for 2009 if I did not have any tax liability for 2008. (form 1040 ES) I am hoping that this is correct, as I did not pay q1 est taxes and do not plan to pay q2 est taxes either on based on this information on the 1040-ES.

I just don't want to be penalized at the end of the year for not paying my est taxes. I am also not sure what to base my self employment tax on.

For 2010, I will have to figure this out. I plan to increase sales each year, so for 2010, should I just base my estimates on my 2009 income at each quarter?

Any advice would be greatly appreciated!

Thanks,
Keith

[phanio]

If you earn over $400 you have to pay esitmated taxes. There are self employement taxes for social security and Medicare as well as income taxes. Just know that the IRS wants their money asap.

The IRS wedsite has a wealth of information for business owners - they want you to pay your taxes and provide the information to help you.

I suggest you start here: http://www.irs.gov/businesses/small/...115045,00.html

You can also hire an accounting firm to help you this year - then use that return and information to help you moving forward.

Your estimated taxes are based on past quarterly earnings. Thus, if you earn so much during the last quarter - that is what you use to estimate.

Plus, you can pay online - makes it easy