I didn't pay taxes quarterly on my small business am I going to get in trouble?

Question

I don't have any 1099 misc forms. I'm new to this whole thing. I didn't pay quarterly taxes. I have 2 kids, college expenses to deduct, loss from stock that I owned for a couple of months, and I didn't make more than 10k for the year. Am I going to get in trouble??

Answer 1

Trouble? Depends upon how you define trouble. You may be facing penalties and interest for underpayment of taxes, but that generally would be it.

Without knowing all of the facts and figures in your situation, it's not possible to say how much you tax liability would be or if there would be any penalties or interest assessed. However, from the information you have provided, it doesn't look too bad at all.

If you are a single parent with 2 kids and only $10k in Self-Employment income as your only income it's not likely that you'll be facing much tax liability at all. There is the SE tax to be concerned with at 15.3% of the net profit on your business but that would probably be offset completely by the Earned Income Tax Credit. With only $10k in gross earnings, you won't have any Income Tax liability as your income is less than the combination of your standard deduction, your personal exemption, and the 2 dependent exemptions for your kids.

Answer 2

I second the information given by "Bostonian". The only way I could see you really being in trouble is if you also had income as an employee (where they give you a W-2) which would bump up your tax bracket. However, in that case there is also a way to get out of penalties - if your withholding for 2006 was at least as much as your total tax in 2005 (1040 line 63), you will not owe a penalty. In the future, just make sure your quarterly payments add up to the total tax for the prior year, and you will avoid interest and penalties. Also, if you owe less than $1000 this year, you are not required to make quarterly payments for the following year. Form 1040-ES (Estimated Tax for Individuals) has all the exact guidelines for whether you need to make estimated payments.

Not having 1099s is not a big deal (won't get you in trouble), it just means you have to add up all your receipts yourself (which you should do anyway to check that your 1099s are accurate) and report your income to the IRS. You will need to fill out a 1040 Schedule C to report business profit; deduct everything you legitimately can on this form as a business expense, and make sure you can document everything you deduct. You also need Schedule SE for self-employment tax (the worst one!)

The IRS website has some good information for self-employed / small business at http://www.irs.gov/businesses/small/index.html .

Hope that helps.

Answer 3

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Answer 4

With 2 kids for deductions, you will probably not owe any income tax, but you will still have to pay the self employment tax on your income. You can pay up til April 15th without penalties being charged, but You may have enough in earned income credit to cover the self employment costs since you do have 2 dependents, if you can not be claimed on someone elses tax return and qualify for head of household with dependent children..

Answer 5

If you have 2 kids and did not make over 10K for the year, you will likely not owe taxes(unless you are a dependent), so you should be ok.

If you expect to make more money next year you should fill out a 1040ES.

Answer 6

I would suggest that you call the IRS directly and simply ask them what to do. My experience with the IRS is that they are generally helpful. Once in awhile you will get a lazy person that just blows you off. If that happens, call again to try to get someone intelligent. The employees of the IRS are just people and they understand that all these forms and laws are confusing to people who are not accountants. Of course, I am a believer in everyone paying their fair share -- so it's fair to the rest of us. There are so many REAL crooks out there -- they won't penalize them if you are trying your best to do it right.

Answer 7

You will probably owe some money, both the taxes plus possible small underpayment penallties, but other than that, no, you're ot going to be in some major trouble.

Answer 8

If the 10k is profit, you will be assessed a penalty, but I wouldn't say you were in trouble.

Answer 9

Pay it right away, as the penalties and the interest keep adding up. Good luck.

Answer 10

No you can do it at the end of the year. It works the same, but you must have proof of the whole year.