If I have a business and lets say out of $10 gross my net is $3, from which will I get taxed on gross or net?

Question

I Live in Los Angeles if that has anything to do with answering my question.

Answer 1

You are normally taxed on the net, but you might have to make some adjustments to the net to come up with what you would be taxed on. Let's make your gross and your net slightly higher to give you some examples of what I mean. Make the gross be $10,000 and the net be $3,000, which would make your expenses be $7,000. Normally you would be taxed on the $3,000 net. But say in the $7,000 of expenses, you had $2,000 in meals expenses, and $2,000 in penalties. Meals & Entertainment expenses are only 50% deductible and penalties are not deductible at all. So, for tax purposes you'd have to take the $3,000 net, and back to that 50% of the meals/entertainment expenses which would be $1,000, and also add back the $2,000 in penalties. Now your taxable income would be $6,000. So, a lot of the time, what you get taxed on is neither the gross or the net, but an adjusted net. And, no, living in LA doesn't have any effect on how you get taxed.

Answer 2

My condolances on living in LA. Taxes are figured on your net income. The gross is just that; the total amount started with before expenses.

Answer 3

You'll be taxed on your net, both for self-employment tax and for income tax. I'm assuming the other $7 is expenses of running your business.

Answer 4

Income tax is always based upon net income. Where you live makes no difference, other than the amount of the total taxes.

Answer 5

are you a c or s corp... or sole propieter? Your should only get taxed on the net but keep good records and do yourself a favor and hire an accountant