Doing your own taxes-Self employed
 

I am self employed and handle the daily books for my business. I am the only employee and do my own state sales tax. Everything else I let my accountant handle. I was talking to another guy in my industry and he laughed at what I was paying my accountant and suggested I look at Turbo tax or another program as such. I can do my state sales tax, but am not that savvy with fed taxes etc. Any suggestions?

If you are not incorporated, the federal tax form is quite simple. You file a "Schedule C" which shows your income and your expenses. The bottom line is transferred to the 1040.

The work involved is getting all your books and records together and placing each expense into a category. Filling out the form takes less than one hour.

If you can do your personal taxes with a 1040, adding "schedule C" is not at all difficult.

If you're incorporated, the forms are completely different and a bit more onerous. I let the accountant do those.

I keep meticulous records and my current software program has everything set up to record expenses. I can print out a report at anytime to show what my expenses are. I just am not sure about such things as depreciating my work truck, writing off losses such as people that did not pay and then the Federal and State taxes outside of the 5% Maryland State sales tax.

I'm not sure about the depreciation on the truck. I take the standard mileage deduction.

The "losses" for people that don't pay are not losses at all. They are simply the lack of income. You've got the expenses but no income for those jobs.

Federal and State taxes are paid based upon your bottom line income on the 1040 if you file schedule C for the business. The net for the business flows to a single line on the 1040.

I will have to pull a copy of the tax form from last year to see what my accountant filed. I do know that for State of Maryland I am a LLC, but for Federal taxes they view me a s a Sole Proprietorship. I guess what I am trying to find out is if any of the self tax programs like Turbo Tax will not only help me file my own return, but have the capacity to prompt me with questions that may further benefit me in terms of paying less tax or taking advantage of deductions that I would otherwise not be aware of.

I checked my returns from last year and it is a 1040 with schedules A, B & C. My business did flow through to my personal return. Hmmm may have to check out Turbo Tax or another program.

I'm sure that Turbo Tax can handle such a situation.

I use Lacerte which is the professional software for accountants. Fortunately, I can pry it out of him for no cost. But, he does handle the corporation's return to the tune of $1K.

I hate doing taxes accountant for me!

I payed an accountant when I first set up my business. Then I realized that getting my books organized for the accountant was about 90% of the job. If you're not incorporated it's not all that hard. Saved me $500+ a year for few hours work.

I am not too familiar with turbotax, but I assume it can handle 95% or more of all tax computations and those they can't do, they probably advise the buyer. I assume they have prompts to ask you various questions to optimize various things like first year expensing of property for faster write offs, luxury auto rules, which apply to all cars, small trucks, etc, etc, ad nauseum.

The question about using canned software is how much the user knows about the law, what is income, what is deductable, etc. ;)

Keep in mind that Congress passed a bill late in the year which extended the
life of some provisions which had expired at 12/31/05. (various deductions)
Only problem was, the IRS had to put the forms to print before the law was passed! Now, they are playing catchup to inform the world about how to code deductions onto certain lines to claim the re-inststed deductions.

Don't forget the telephone tax credit--for personal & possibly for Sch C also.

Brian is correct: lost or uncollected income from customers is not deductable by cash basis taxpayers, (you're not a doctor are you?)

Single member LLC's are disregarded entities for federal income tax purposes, meaning it (the LLC) files a Sch. C, E or F on the member's 1040.


Under no circumstances would I advise you to file your return manually, meaning doing it by hand. Way too many chances for error.

For those who want to efile and don't want to use a paid preparer or buy a canned program, the IRS and commercial software vendors developed a freefile program for taxpayers to use. It's free filing if your income is below a $$ 52,500 level and there is a charge for filing if income is higher.
Info on that program is here.

http://www.irs.ustreas.gov/efile/article/0,,id=118986,00.html

Good luck.;)

Yeah, TurboTax for me. I can't imagine anything easier. This year I'll teach my 17 year-old daughter how to do her taxes on it. She's pretty sharp and motivated when it comes to money.

I used to have a CPA do my taxes. One day I realized I was doing just about as much work to get it ready to give to her as I would have to do if I was filling out the forms myself. I've been doing it myself ever since. Good luck.

Same here. Been self-employed for ages. The work is in compiling the data -- TurboTax does the rest.

thanks for that link dyna. I always did my own when it was 1040ez, but the wife has been going to her people for a while. so last year we did that, and ended up paying them $160 on top of the $3200 that they decided we should pay the gubmint. and, with quicken, I already had all my ducks in a row.(self-employed)

Thanks!

Can Turbo Tax calculate your State taxes and Federal taxes?