I want to start a sole proprietorship cleaning service in Connecticut.How do I pay taxes on this?

Question

I know how to register,etc...but nobody could give me a solid answer how to pay taxes.I know that I do decleare all profit with my personal income,but do I need a special taxpayer(as a business) # and do I have to charge a sale and/or service tax to my customers?Thank you so much for any help here...

Answer 1

http://www.ct.gov/drs/cwp/view.asp?a=1454&Q=266112&drsPNavCtr=|#40828

You may get more answers if you post this in the correct category. Connecticut is not in the United Kingdom.

Answer 2

A sole proprietor files his wage and business income using the same form. You wages from another job (where the employer is deducting social security and medicare) and your wages from your business will be seperated in computing you "self-employment" tax. If you have less than $400 in business income, you do not have to file self employment tax. If it is greater than $400 you are taxed on the first $97,500 for social security. Here is how it is done. First, take only the income you received from your business (do not include other income sources such as wages) and multiply it by .9235. Now you are going to take that figure and compare it to another figure. The other figure is the total of $97,500 (that is the 2007 social security base which is indexed to inflation) minus your business income. The two totals you have from, multiplying by .9235 and the subtraction from the s.s. base, need to be compared. You take the LESSER of those two numbers and multiply it by .124 (which is 12.4% s.s. tax). That is the amount of s.s. tax that is due from your business activities.... and you are almost done. Take all of your business income and multiply it by .029 (which is 2.9%). That is the medicare tax portion that you will need to pay. BOTH the s.s. and medicare tax figures combined create what is call "self-employment" tax. On your wages earned from your employer, you only pay 6.2% s.s. and 1.45% medicare taxes... your employer matches what you pay dollar for dollar and most likely files a Form941 on the 15th of each month.... and a 940 at the end of each quarter to correct any accounting errors. The short of it is, this is why self-employment is called "double taxed" or "double taxation.

This is a relatively simple tax computation. It gets real messy with things like property transactions, depreciation recapture and alimony recapture and lets not even talk about exemtion phase-outs and when social security benefits need to be taxed for mid-income taxpayers. I am studying to become a C.P.A. Good thing about the profession is job security... now, you know why.