Do I need a business license? Self-Employed IRS Tax Question? Agreement form with my clients?
Do I need a business license?
I'm a self-employed video editor and I do other gigs on the side.
Last year I was doing pretty good for video editing.
Made about 5k and I've been doing this for about 2 and a half year. The first year was trying to get clients and learn as I go. (Long story)
2016 was a good year (In my opinion).
Should I get it? Not? Will it somehow help with my taxes?
I've been getting paid through PayPal how do I write that off or do I?
Instead of PayPal should I have them send a direct deposit to my bank account?
What forms should I send the IRS? (If there is any)
How do you do it?
I finally have 2 ongoing clients, and they will be paying me once a month for a 15-minute length project. About $500 a month. The
I want to do things right since my skills are getting better and I want to get more recurring clients. I need to know the ins and outs of self-employed tax information.
One Last question.
Do you have a simple agreement with your clients?
I've been lucky to have no trouble with any of my clients but in the future...
Thanks for reading and sorry for all the questions!
I'm 24 and I want to learn as much as I can in the *Legal* aspect of the business.
Bob, want to take this one?
Tilt Media Inc.
Video Production, Post, Studio Sound Stage
I'll jump in with an answer that his honestly not me trying to be flippant or a general smartass:
Ask your CPA.
Those questions are all important enough (and, depending on where you live, different enough) that the really only good/smart/best advice is going to come from a pro in your area.
If you don't have an accountant, get one. And for simple questions it's not going to cost a fortune.
We have had the same CPA for 20 years, as of this year. We don't use him for day-to-day accounting, regular bookkeeping, payroll, or any of that stuff that we do in house... but he is invaluable when it comes to tricky questions that we can't answer ourselves and for keeping us all in line at tax time.
Fantastic Plastic Entertainment, Inc.
You don't do it.
But you say "I only made $5000 in the last 2 1/2 years, and I can't afford H&R Block".
Perhaps you were an orphan. Perhaps your parents past away when you were young. Perhaps no adult spoke with you when you were young.
YOU MUST FILE TAXES IN THE UNITED STATES. Even if you own nothing. You must declare your earnings.
Let me be a little specific. Here in the lovely state of Florida, where there is no state and city tax - only Federal tax, they do have SALES tax. And I hardly sell anything, except my services, which are not taxable. But I occationally sell some parts like cable and connectors. This coming January 20th, I will have sold no parts. I MUST FILE my form EZ-15 State Sales Tax by January 20th, even if I owe ZERO money. If I don't I will be penalized by the Florida Department of Revenue for $50 for the month. Even if I wind up paying them on January 21st.
Let me make this a little more clear. Let's say you work on a job with Todd Terry and Rich Rubasch. And lets say they are not nice to you, and you punch them in the face. The odds are, since you are a nice guy, even if they try to press charges, probably nothing will happen to you and you will get a suspended sentence, and you will never spend more than one day in jail. HOWEVER, let's say you EMPLOY Todd Terry and Rich Rubasch, and you don't get a W9 form from them, and it is determined that they are your employees, and not freelancers, and Todd Terry files for unemployment because he worked for Suz Rizza Productions. Now you are in BIG TROUBLE, and the government will come after you. SOMEONE has to pay workmans comp, someone has to make the social security deduction. And if your ACCOUNTANT determines that you have not earned enough to make tax payments, then it's his job to determine this (or H&R Block, or whoever you decide to go to).
Don't be foolish. You just can't pocket the money and hope for the best (that no one will find out). They ALWAYS find out, because you can be selling crack on the street corner, and you might get away with it. But don't pay the taxes on the crack that you sold, and you will be prosecuted. Think this is a joke - it's not.
As you have been advised, get an accountant (even if it's H&R Block) - or get a job, and THEY will take out 1/3 of your money for taxes and social security.
See, it's not easy being in business - even if it's only you. It's not fair, is it ?
Rescue 1, Inc.
• First, do a search on tax and start up topics on this forum, your questions have been answered many times. Otherwise you'll upset us Old Farts.
• Avoid PayPal or at least have the clients' payments go to a dedicated biz checking account via PayPal. They can send it electronically to your account but if they are local, it's sometimes better to ask if you can come bye and "pick up my check". That takes away the float and you get your hands on the money quicker. Even local electronic transfers may take four days. Also, do NOT use PayPal unless you jacked up your fee by 3.5% at the start when you gave them your estimate.
• You need to divide your life into two: Biz & Personal checking, Biz & Personal credit cards, Biz & Personal Debit Cards. Make up a business name for this.
• When starting your "business" checking account, don't say it's for business, the bank will charge you more. Come up with a name that won't trigger them moving you to the higher fee biz account, or use an online bank that doesn't care. You don't want to have to get a FEIN number. Then the IRS will expect you to withhold taxes and your state may require you to carry the onerous Workers Comp policy.
• CPAs charge more, try to find a bookkeeper who works out of their home and uses TurboTax or QuickBooks. Someone who knows the small service business world. CAs are best if you are incorporated and/or making larger sums.
• You could register your name as a sole proprietor, the fees in Illinois are low, like $200, but it does put you into the attention of your state's Dept of Revenue authorities, who then expect, now that they know about you, to send in certain forms, paperwork and fees by certain exact dates. So since you are making so "little", I don't know if your state requires official registration. Look it up. You may not have hit their threshold.
• As for "owing taxes"...I am from a family where every male on my father's line had never had a "job", from time immemorial. Rather, they all owned small service businesses. The present US tax codes favors the self employed. In our family, right before New Years, my dad would buy as much as possible that could be construed as a business expense, including our school supplies (anything from the office supply store!). Had you posted this in November I would have advised buying $5000 in business related expenses. Even Google Ads! They're expensive so you can easily zip through $5K!
• Lastly, you can write off anything you want, the problem is what will happen if you're audited. You aren't making enough to be targeted but their computers randomly spit out taxpayers' returns for audits. Be prudent. Save every receipt for business. Don't try to write off meals. But from what you wrote, which is skimpy, I don't know if in your state your "side business" is making enough money to be declared and registered. Why not join your town's chamber of commerce for free advice? There's lots of local accounting types at their networking meetings and you can pick their brain over cheese and wine for free. Which, to the self employed, is the best price. There's also a group called SCORE, the local chapter will have free info:
Thank you very much for your posting! Very helpful!!
Yeah I may have worded it wrong, about writing it off...
Didn't mean to go under the radar or anything with my taxes.
I'm just a one-man band freelancer, living in Las Vegas. ☺
Just wanted to know and understand the aspect of taxes and whether or not if I should register for a business license.
A small business and use independent contractors, you’re probably familiar with the terms. usually, forms are used to report income to freelancers, independent contractors, and individuals who, have own business, company, and their employee, are generally responsible for paying the employer’s and employee’s portion of taxes. This because we need the licensing business as per conditions.