Newbie sole propriatorship tax ?

[Abigail]

I am just getting started. Haven't had a client yet.
I've opened an account and will deposit everything into it. I don't plan on taking anything out except for purchasing business only items. No income yet.
I have a small loan to pay off first, and want to save enough in my account to purchase all new equipment if something happens to my stuff so I can be back up and running in no time.
After that, I plan on saving up for a vehicle.
Once I have the vehicle, I will begin drawing a paycheck.

When do I have to pay taxes? Before I draw a paycheck or not until I do?

Thanks all

 

[SMRBAP]

My understanding:
As a sole prop you are going to have to file quarterly (state and fed), don't and you may pay penalty's at the end of the year.
Regardless of what you take out, profit is profit and taxes will apply to every net dollar after deductions per qtr.
With that said - it's the end of the year, the sum of the entire year that your final taxes will be calculated. If you paid too much you'll get a refund, not enough, you will have a bill.

As a sole prop you aren't really taking a salary separate from company profit and loss as you would in an incorporated situation. So it matters not what you take out, what matters is what you brought in vs. what your expenses were.

HIGHLY recommend finding a GOOD accountant and buying 2-3 hours. A good accountant will charge more than $25/hr, isn't your buddies sister in law, and won't have a table set up past the checkouts in a walmart....lol. I recommend staying away form large national accounting firms that mostly target doing mass individual returns. Have him/her help you choose the entity that suits your immediate to long term plan now.

Whatever you spend with a good accountant will come back to you x5 at minimum in the first year alone.

If you are totally green in the biz:

- Truly learn how to provide the services you intend to offer, classes, certs, here.
- Business plan - business plan - business plan, write one.
- Learn how to market, don't aimlessly shotgun dollars out there.

There is a great reason why the used equipment market in our industry is flooded with gear - don't add to that

You found the right place to get started. Pick your topics and get to searchin'

Good luck and welcome to the rug suckers club

 

[Abigail]

Thanks! I'm working with the SBA now. I need to pick a few more brains!

 

[J Scott W]

Strictly speaking, you would be paying estimated federal income taxes, FICA (social security), and Medicare taxes 4 times a year. (January 15, April 15th, June 15, and October 15th if you use a calendar year as your business year.) These payments will be based on an estimate of your profit. Since new business will not always be profitable the first year and an accurate estimate can be difficult to come by, the IRS often lets you slide for your first year. Expect to pay taxes before April 15, 2014 for the current year and also pay taxes for the 1st quarter of 2014 by April 15th of next year.

State and local taxes may be different. There are also likely business licenses to pay for.

 

[truckmount girl]

You SHOULD pay your estimated taxes quarterly, but as a sole proprietor, especially if you don't expect to owe at the end of the year because of start up costs and deductions, you can get away with just filing annually, I always have, and it has never been a problem. However, I am in California and there is no state/local tax on labor. if there is in your state, you will HAVE to file quarterly to pay your taxes collected from your customers at the very least.

Take care,
Lisa