Finance Questions? Ask a Financial Expert for Answers ASAP
Hello. Thanks for your question. My name is XXXXX XXXXX I will be happy to assist you today
You don't have to set up an LLC or get an EIN. That's not required to be in compliance with laws
An EIN is only absolutely necessary if you have employees that you are paying. No employees, means it's not REQUIRED to get an EIN
You could set up an LLC if you wanted a more professional appearance. If you did this, your tax return would still be the same as if you did not have an LLC because the IRS disregards XXXXX XXXXX So, your income would still be on schedule C
If you set up an LLC the only way you would need an EIN is if your bank required one for your account. You would not do any of your tax filings under the EIN, it would still be done under your social security number.
But, there's no need to set anything up to be in compliance. You can keep doing what you're doing and be okay
In regard to the taxes, would I just get the generated documents from paypal and submit them at the end of the year? I just wasn't sure if this is something I needed to be doing weekly, or if I could just save up the money, and pay off the taxable income when tax period comes around.
During your first year, you can pay the tax at the end of the year in total with no penalty. After that, you need to make quarterly estimated payments
You do this through filing form 1040-ES
A rough estimate would be you take your tax liability from the prior year and divide it by 4. Send in 1/4 at the end of each quarter using form 1040-ES
Sorry for the questions, I just was concerned about a few things as I had never embarked on my own business before. As I had stated, this all operates online, through a variety of forums, and I send customers the "letters" they request, via email. I don't know how often I will be doing this, and it really all depends on supply and demand. If this business would only be until half way of next year, would I still have to send the payments throughout the 4 quarters, and be refunded, or would I just stop, when I stop the business.
I know paypal stated somewhere that they compile all your debits, and credits, and compiles a document for you at the end of the year, so I figured I would have to deal with that while filing my taxes, and provide that to the people whom are doing my taxes. I just wanted to make sure everything else I needed to prepare would be situated, such as the 1040-es you mentioned above.
You could stop the estimated payments if you stopped your business, because you would not be incurring a tax
And yes, PayPal will provide you with year end documents and you could provide that to your tax return preparer.
Ok, so basically, I don't truly need an LLC, but I could do that to help protect myself, if I should ever be sued for whatever reason. And I would just be able to do my taxes as normal.
Yes, that is correct. That's really the only reason you would need an LLC
It's not required for tax purposes
I really appreciate your time, and you answering the questions I had. I am in a more comfortable place now.
Thank you for your time!