I’ve been flipping furniture, and it started as a hobby, but it ended up making way more money than I expected. I don’t have an LLC or a business account—everything has been going through my personal bank account. I’ve saved 40% of what I made to cover taxes, but I’m not sure how to properly claim this income on my taxes.
I know I’ve been careless with this setup, and I’m already stressing about it, so please, no lectures. I just want to know how I can handle this and pay what I owe. Any advice is appreciated.
Ash said:
You can report your income and expenses on Schedule C. You don’t need an LLC to do this—you’re considered a sole proprietor just by doing business.
I also have a part-time job and will get a W-2. Can I handle both at the same time? I really don’t know much about taxes.
@Oaklee
Yes, both can be handled together. Your W-2 income and self-employment income will both go on your Form 1040. Schedule C is for your business income and expenses. I suggest you check out IRS.gov for Form 1040, Schedule C, and their instructions. Even if you hire someone to help, it’s good to understand the basics.
@Oaklee
Yes, you can do it together. You might want to use the IRS free-file software, which includes Schedule C. Or you can go with something like TurboTax, which guides you through it step by step.
You can report both income and expenses on Schedule C when you file your taxes. You don’t need a separate business account or LLC to do this. Just keep track of your business transactions.
Setting aside 40% was a smart move. Despite what you said, you do have a business. If you weren’t making money, it would be considered a hobby, and you wouldn’t be able to deduct expenses. As long as you’re turning a profit, it’s a business, and there’s no need for an LLC.
You’re off to a good start with the 40% savings. Moving forward, consider opening a separate bank account just for your flipping business. Keeping business and personal finances separate makes things much simpler.
While a separate bank account isn’t required, it’s definitely helpful for tracking business expenses and income. Just remember, if you ever get audited, the IRS can look into all your accounts—personal and business.
Jordan said:
Just a heads-up—if you didn’t pay estimated taxes last year, you might get hit with a small fine. It depends on how much money you made.
Estimated taxes?
When you file your taxes, you’ll combine your W-2 income and any profit from your flipping business to calculate what you owe. If you didn’t pay enough throughout the year, you might owe penalties. To avoid this in the future, consider either paying estimated taxes or increasing your withholding at your part-time job. The IRS has a withholding estimator online that’s really helpful.