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Started an online business. How do I go about taxes. I don't

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want to get in trouble...
Started an online business. How do I go about taxes. I don't want to get in trouble end of the year.
Submitted: 1 year ago.Category: Tax
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4/7/2016
Tax Professional: Lev, Tax Advisor replied 1 year ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,141
Experience: Taxes, Immigration, Labor Relations
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Hi Chris and welcome to our site!As you just started the business it is a good time to set your books.You would need to account for all your business expenses and keep all supporting documents.There are special requirements for record keeping Be sure you become familiar with following publicationhttps://www.irs.gov/pub/irs-pdf/p583.pdfRecords, such as receipts, canceled checks, and other documents that support an item of income, a deduction, or a credit appearing on a return must be kept as long as they may become material in the administration of any provision of the Internal Revenue Code, which generally will be until the period of limitations expires for that return. For assessment of tax you owe, this period is generally 3 years from the date you filed the return. Returns filed before the due date are treated as filed on the due date. .You will report your income and may deduct qualified expenses.Business expenses are the cost of carrying on a trade or business. These expenses are usually deductible if the business operates to make a profit.To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business.- you may report all business income and expenses - on the schedule C -http://www.irs.gov/pub/irs-pdf/f1040sc.pdfThe net income (after deductions) will be reported on the form 1040 line 12 -http://www.irs.gov/pub/irs-pdf/f1040.pdfIf the business has net income over $400, it may be required to file Schedule SE, Self-Employment Taxhttp://www.irs.gov/pub/irs-pdf/f1040se.pdfand net self-employment income is subject to 15.3% self-employment tax.Self-employment taxes from schedule SE will go to the form 1040 line 57 -http://www.irs.gov/pub/irs-pdf/f1040.pdfAlso - you will deduct half of self-employment taxes on the line 27.Generally - that all you needs tax purposes.You may also find helpful following publication https://www.irs.gov/pub/irs-pdf/p334.pdfLet me know if you need any help.
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Customer reply replied 1 year ago
looking more for a way I should save money for payment of my taxes. I started the business about two months ago and have already profited about 8k. Its simply a buy and resell business online only. My payments are processed through paypal which I have a business debit card which I use for any expense for the business.
Tax Professional: Lev, Tax Advisor replied 1 year ago
As your business related to retail - you need to keep track of inventory.You must generally use an accrual method of accounting for your purchases and sales and figure your cost of goods sold . You would need to valuate your inventory at the beginning of the year (as you just started - it would be zero) and at teh end of the year.That is your deduction.You might have other business related expenses - and as we already mentioned - it is very important to keep track and adequate records..
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Tax Professional: Lev, Tax Advisor replied 1 year ago
Generally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part.For example, if you borrow money and use 70% of it for business and the other 30% for a family vacation, you can deduct 70% of the interest as a business expense. The remaining 30% is personal interest and is not deductible..If you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Refer to Publication 587, Business Use of Your Home, for more information..If you use your car in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses..If your business is profitable - you might want to put some money into qualified retirement fund - that contribution is generally deducted for income tax purposes.Let me know if you need specific details regarding specific deductions....I appreciate if you take a moment to rate the answer.Experts are ONLY credited when answers are rated positively.If you still have any doubts, need clarification - please be sure to ask.I am here to help you with all tax related issues.
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Lev
Lev, Tax Advisor
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