Clean It Time

Im starting an Appliance repair business for some high cost juicers and kitchen appliances. Im working from my home so im getting a business license and a tax id. My question is if i repair something for a person or business and i have to install parts, do i charge him tax on his invoice or do i just charge him labor? And when it comes time to do my taxes how would i claim labor on it? How much would i need to pay back?

Your state determines what is subject to sales tax and what it not. You must register with the state to collect and render sales taxes. Some states tax labor charges and some do not. Your state tax department can tell you what is taxable and what is not.

You pay your income taxes separately from sales taxes. Since you are self-employed you are required by law to keep accurate business records and you use those records to prepare your tax returns. You report your business income and expenses on Schedule C. If the net profit is $400 or more, you attach Schedule SE to calculate the self-employment tax.

If you estimate that you will owe more than $1,000 in tax when you file — about $7,000 in net profit will do that — you must make estimated tax payment using Form 1040-ES. If your state has an income tax they have a similar estimated tax payment system. Payments are due on 4/15, 6/15, 9/15 and 1/15 of the following year.

I’d highly recommend a consultation with a local tax pro — a CPA or EA who specializes in small business taxation — to get your bookkeeping system up to speed, set up your sales tax records, and estimate the quarterly income tax payments.