What all will I have to be responsible for if I file for my own tax ID?

[vi edit]

My girlfriend and I both work full time on opposite schedules. I work 9-5, she works 2-11. That basically leaves me with about 5 hours a night just sitting around twiddling my thumbs.

I've done quite a few house calls to repair/trouble shoot computer problems for neighbors, relatives of neigbors, and some co-workers. I figured that I could drop an add in the local papers advertising my services and pick up a couple hours a week after I get off of work.

This will a) give me something to do at night, and b) give me a little extra $$ to put towards a car loan.

In the past, everthing was done under the table, and uncle sam never saw a dime of that extra $$. Well, I'm in a geographic area where there really aren't any competent shops, and there aren't any shops that charge a reasonable amount for their labor.

I think that the fact that I can go to their house, sit down with them and fix things right at their house, plus the fact that my rates are half of what they would be paying at a computer shop would be pretty inticing.

I also have the situation that I've undercut a couple consultants around town before, as well as some of the local shops. They know me and know that I've stolen potential customers.

The possiblity of the shear volume of work, compounded by the fact that I have some "enemies" really makes me want to cover my tracks if I persue this route.

I want to know:
a) how exactly do I persue getting my own tax ID
b) how often, and how do I report my taxable income to the government
c) how will this factor into my full time job
d) will I now have to file long form

I know that some people claim expenses such as milage, vehicle depreciation, and whatnot as "business expenses", I guess I would be interested in that information as well. I would imagine that those deductions greatly increase the difficulty of your tax calculations.

Thanks for the time

 

[thebestMAX]

This may work in your case;

Incorporate as a subchapter-s corporation. Only costs about $100. All your income flows through it to you and you pay ordinary tax rates. You get the benifit of deducting all your expenses in the corp before you get income and have a layer of protection from law suits. Pay taxes once instead of twice.



NOTE:

THESE MATTERS REQUIRE YOU TO DO A LITTLE RESEARCH. i AM NOT A LAWYER OR CPA just thought they may help you.

Ive had 2 subchapterS corps but rules change constantly.

You report and pay estimates quarterly, doesnt affect your regular job but yes, you will have to file long form. Bet you probably should already. Not at all difficult with a program like Turbo Tax.

Hope this gives you a little help and things to think about.

 

[MISTER 2 U]

keep it cash and part time and don't tell uncle sam.

The reason the other shops prices are high is to cover thier over head
like insurance , taxes , office space ect. ect.
If you keep it part time and collect cash thier is no trail to trace.

 

[Daniel]

I did it years ago but I don't remember the exact name of the place to go, call your local revenue dept and ask, they might just let you walk in and sign up for one, that's how it was awhile back anyway.

 

[thebestMAX]

Sure-

Let the rest of us pay his taxes. THIER is no justice for that kind of thinking.

Just imagine if all of us paid what we were supposed to ANd NO MORE what would happen.

 

[rahvin]

You don't need an EIN. Your tax ID is your social security number. Unless you are trying to do an LLC or something all you need to do is get a business license from your local city and a resellar number (sales tax thing) from your state. Should take you about 2-3 hours and $100 to get both. All small business work can be filed on your own, it's just a seperate form on the 1040. Just keep good records and make sure you pay everything, business have a much higher audit rate than individuals do.

 

[BoberFett]

To start, you're better off just setting up a sole proprietorship rather than bothering with incorporating. For a small time, one man operation, incorporating will just create paperwork for you.

You'll want/need to register a business name with the state for a small fee. You'll also need to contact your state department of revenue, because you'll a need state tax ID to collect and remit sales and/or use tax. To clarify what Rahvin said, your federal tax ID as a sole proprietor would be your SSN.

 

[SirFshAlot]

I think it was only $35 for three years for a tax ID here in Utah.
I don't do any business on it, so the paperwork is just returning a form every three months with a big 0 on it.
I have the business license so I can buy wholesale, and it has more than paid for itself.

 

[thebestMAX]

Bobber-

You may be correct. I think a sole prop pays more taxes out though such as in SS and self employment.

As I said, its been a while since I ran my on company and laws change radiply. Thats why I said do a little research. You did give him another option.

 

[vi edit]

Thanks for the info so far guys.

To clarify - I want to keep it as small and simple as I can.

Are my assumptions correct?

1) register a business name with the local government
2) contact state revenue department to set up a state tax ID
3) pay state taxes through the tax ID that I register for
4) pay federal taxes through my SSN

Do I have to charge sales tax? I would rather not if I don't have to. I would much prefer to just charge a flat per hour rate, and then report on the total income at the end of the quarter.

Thank you for all answers this far.

 

[UnixFreak]

<< keep it cash and part time and don't tell uncle sam. >>



no offense, Mister 2 U, but I couldnt think of worse advice to give him. Its best he keep everything above the table. It is really the safer way to go, Especially if the business takes off, and you experience above average growth, it is better to be setup legally now, than to try and catch everything up when you are forced to. I also own a business and am employed, I think the sole proprietorship method is the best way to go. I would go to your local library, there are usually pamplets or books available, with information on your local laws, and who to contact. I really think its the best way to go.

 

[vi edit]

UnixFreak, my thoughts exactly

 

[Tripleshot]

You can look into forming an LLC as well. Serves the same purpose,but you can own several companies under an LLC.

I have done that. You still pay taxes on the tax ID# and you need to check with your state laws to determine if labor is exempt or not and what the rates are.

Good luck

 

[vi edit]

Hmmmm...

Instead of spending that barnes and nobles gift certificate on a computer book, I think I'll look into a &quot;private business ownership&quot; book.

Any recommendations?

 

[denali]

You might want to check out SCORE they often can provide you with great support. The link above is for the Cedar Rapids chapter, you can find the national office here.

 

[HappyFace]

Here's a good article at firing squad. Has lots of info concerning getting a sales tax ID, and setting up accounts with wholesale companies. I didn't pay a single cent for my certificate! (Live in Illinois)

Here's an excellent book on home business. It has answers to questions I'd never have thought to ask! Highly recommended.

 

[MISTER 2 U]

UnixFreak,
No offense taken and I agree with your post.
It was my understanding that he was going to work at his
fulltime job then do computer work on the side.
If he was to do this full time then do it legit
but as a hobby or after hour work ??????

 

[kranky]

No time right now for a longer reply, but while I'm thinking of it, I'd suggest getting a separate phone for your business calls. Because sure as hell, the people you do onsite work for (and who paid you already) will call you at all hours for help, and expect it to be free because &quot;I just have one quick question&quot;. Then the &quot;quick question&quot; turns out to be &quot;When I turned the PC on, the thing didn't come up that does the other thing so how do I fix that?&quot;

 

[UnixFreak]

sure, why not? By the time you make your deductions for expenses and such, your taxable income will not be that great at first, and they dont take a huge cut, and it leaves you room to expand, the under the table method only allows you to go so far, you can not open a shop or purchase wholesale items, as well as the risk factor if you are audited later down the road, which will invariably end up more expensive than the amount you could have paid on taxes. I am not trying to sound like a do-gooder here, but I think it is the sensible approach if you are keeping the future in mind.

 

[BoberFett]

I second what Kranky said. I didn't have my business phone yet when I started filling out forms to sign on with distributors and such, so I gave them my home number. I still get calls at home. :|