[dogfish]

Hey everyone,
I'm newly in business for myself and I have a possibly stupid tax question. I am a sole proprietor and I know I have to pay all the taxes on the income I personally receive from my business(about 20%).

Do I also have to pay taxes on my operating expenses(i.e. indirect job costs/overhead, etc.) and if so about how much? I will obviously be reducing the amount that I would need to pay taxes on by whatever amount I am able to deduct but its not a dollar for dollar deduction. Is there a rule of thumb percentage on just my operating costs I can start using now until I can see how things are going?

What about paying taxes on my profit?

Can anybody help me?

 

[hatchet]

Look at this page http://www.irs.gov/businesses/index.html
and on the left side select the type of business you have under Information For:
Then look for the Tax guide for xxxx type of business.

 

[Mike Finley]

Geez, it's been so long since I was a sole proprieter that I hope I have it right, but you should be paying taxes only on profits. If you spend a dollar on a legitimate expense you deduct that dollar from your income. Then you pay taxes based on your profits which become your personal income. Profits = business income - expenses.

When you say it is not a dollar per dollar deduction are you referring to percentages that the IRS allows such as 50% for meals and entertainment? It still just becomes income minus expenses. 10,000 income minus (300.00 in meals * 50% = 150.00) = 9850.00 in profit.

No matter what you do, I would suggest you incorporate as soon as possible. Nobody should ever be a sole proprietorship in my opinion. There is no protection of your personal assets.

 

[Teetorbilt]

dog, welcome!
Line up an accountant, CPA. Getting started, they will give you a check list of everything that you will need to save and record.