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Taking out taxes for business
Is there a site I can go to or a method in order to find out what I will owe in taxes from my at home business. Example. I sell X amount of scarfs per month and I make about $2000.00 every month on my scarf sales and I live in Y city...I will need to take out Z amount of dollars per month for all aplicable taxes and put into a seperate account (cause that is how I would like to do it). I am specifically looking at Iowa but I would like to know incase I decide to move. Thank you for the advice.
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Hi, I am an accountant and I can help. I think you are talking about sales tax. So what is the sales tax in Iowa, you are supposed to ad that amount to each sale to a person who lives in Iowa. If you are selling on the internet, you don't have to charge and collect sales tax from people who DO NOT live in Iowa. So if Iowa's sales tax is say 5%, and you sell a scarf for $20.00 in Iowa ,or over the internet to a person who lives in Iowa and that is where you will be shippin it ,then you actually charge $21.00 for the scarf and $1.00 of that is sales tax that you collect and hold and pay to the state in a monthly or quarterly basis. Of course you have to register with the state of Iowa and get a Sales tax ID #. You can find more info on the state's website, and probably even register.
Now Income TAx is a whole different animal.
Income tax will definitly be owed to the FEDS, (the IRS) and maybe to your state too, if they have an income tax. Assuming you are TOTALLY honest and report all sales, then from your income from sales you have to deduct your expenses. Material, yarn, decorations, milage back and forth to pick up supplies, postage, mailing costs, ebay fees, if you sell on the internet, pay pal fees, even the fees for your internet service provider can be deducted too. Advertising, business cards, brochures, etc.
Now once you deduct all of these expenses from your total sales, the remainder is your profit and what you'll pay income taxes on. Oh and be sure and deduct the sales tax, don't pay income tax on that. That is not a profit to you.
You'll have to pay self employment tax too which consists of SS and Medi taxes which are current, (together) 7.20 percent (of your profit). Income tax varies. based on your income. Averages are between 14% and 28%.
When it is time to do your taxes, I suggest to go to Turbo Tax.com, sign on and file you taxes with them. They will walk you through the whole process. Costs from $15.00 to $30.
Bottom line, if you took 15% of every sale and put that money away in anticipation of paying your taxes, you'd be safe when tax time comes.
Just remember Sales Tax is seperate.
HOpe this helps.
- Michele
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