Starting Online Business Faq
self-employed: how do I pay my income tax?
I plan to start an eBay business and be self-employed. I want to buy items from drop shippers and sell those items on eBay. In order to buy items from drop shippers I needed a ‘sales-tax id number’. So I got my IBT number (Illinois Business Tax number). Here are my questions (I’ve done all the research on the irs.gov website, but I just want more help for reassurance sake):
How does a self-employed ‘eBayer’ pay for income tax (IL-1040) online? Do I have to pay yearly? When do I have to pay, and when is the deadline? How much do I need to make in order to pay? If someone could just direct me to an FAQ for someone in my situation, that would be nice.
Go look at form 1040ES.
Dummy up a 1040 tax return with your projected income. You’ll need a schedule C and a schedule SE. (Pay attention to your expenses. You can deduct what you pay on shipping materials provided you have the receipts.) Look at what you *might* owe. Divide by 4 and this is your federal estimated tax (you adjust up/down if you make more/less). Send it in 4/15; 6/16; 9/15 and 1/15/2009.
Do the same for the state.
Be warned, many eBay sellers who use drop shippers lose money or they are on a very thin margin. You may not make as money as you hope. If this is a PART-TIME job and you have a full time job, periodically tweak your W-4 to increase/decrease extra withholding instead of sending in estimated payments. (For example, I told my employer to increase withholding by $300 a pay period when I realized I’d have $20K of other income.)
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