Today TaxMama hears from Gabrielle in the TaxQuips Forum, who is trying to help. “My boyfriend is a carpenter and makes about $12,000 annually. He doesn’t have anyone working under him and really only does small jobs. Last time I did his taxes, he owed $1,700 dollars. What forms should I be using? I feel as if I did something wrong. I made four times that amount and got quite a bit back. How could my tax rate be so much lower?”
You have a job, right? You have withholding, right?
Your boyfriend has a business. He probably paid nothing in during the year. Aside from income taxes, all of his profits are subject to self-employment (SE) taxes of 15.3%. (You figured that out, I can tell, from your subject line.)
Not only does he not have much coming back, he actually owes money, right? Yup, that will do it.
The main thing you might be doing wrong? Perhaps there are business expenses you’ve overlooked, or some tax reduction opportunities still at his disposal. For instance, if he paid for health insurance, you can use that to reduce his income taxes AND his SE taxes this year (a once-in-a-lifetime opportunity).
Read Small Business Taxes Made Easy for more ideas. You’re trying. I admire that. It takes great courage to try to prepare someone else’s tax return!
And remember, you can find answers to all kinds of questions about business income and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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