I am an independent contractor. I sell travel services. How does this work with my taxes?
I am an independent contractor (not MLM!!) I sell a travel service to customers. I get a commission from my host agency. I have almost zero business expenses. How do I go about filing my taxes? I haven’t got any commission yet but I want to figure this out before I do. If I don’t like all the hoopla I will quit and stick to regular employment.
In short, I sell a cruise, I get 500.00 or so commission. I operate as an “independent agent of …..” I do not promote myself as any “business” name.
How do I file my taxes both state and federal? Do I have to do it quarterly?
Please Advice.
At the end of the year you will report your commissions & expenses on a Schedule C (here’s the link so you can see the types of expenses you can take http://www.irs.gov/pub/irs-pdf/f1040sc.p… ). The profit or loss from the Schedule C flows to the first page of your tax return & gets added/subtracted in/from your income.
There are probably expenses you are not thinking about. For example, itemized cell phone or long distance calls, % of internet connection, % of your computer/printer, paper, ink, any business mileage (even to buy office supplies), postage……the small deductions add up.
As soon as you start making a profit you will have to determine if you need to make estimated payments. But instead of 1/4 payments the easiest way is to increase your withholding if you also work a regular job. My general rule is to increase withholding from my regular paycheck by 30% of my profit (commission less expenses). If you want to make 1/4 estimates you might need help the first time, but here’s a link (look about mid way down) for further info: http://www.irs.gov/publications/p505/ind… Important: profit from self employment is taxed at a higher total rate because you pay all of the social security & medicare (if you work for somebody else they pay 1/2).
Don’t forget if you have a profit you probably will have state tax due on it, and possibly local business/merchantile taxes (possibly even a business license is needed).
If you end up with a loss (which doesn’t sound likely) that’s o’k, but not indefinitely (there are “hobby” rules that limit the number of years you can have a business loss).
Best of luck!
T-Corps File – MLM TCORPS part 2
