Through affiliate marketing, I began to make a respectable living, but now I’m concerned about taxes. I’m not sure whether it’s true, but I noticed somewhere that I have to pay quarterly taxes because it’s considered self-employment. At year’s end, the site I work for, TikTok, issues 1099s.
In addition, is filing an LLC, S corp, or something similar required to reduce my taxes? The figures range from 6,000 to 20,000 per month.
Since I’m eighteen and this will be my first tax payment, I don’t think any information is too evident.
To prevent fines at the end of the year, you should pay your taxes quarterly. It is not required to form an LLC or S-Corp, but if your goal is to make a sizable contribution to a solo 401(k), an S-Corp may be helpful.
In the same vein, think about allocating a portion of your profits to a low-cost stock market index fund within a Roth, regular, or solo 401(k) or IRA. This may position you for an early retirement or a secure financial future. It can have a significant impact to begin this at age 18.
As a self-employed individual, you’ll owe self-employment and income taxes on your profits, which are your revenue minus any necessary business expenses. The IRS requires quarterly tax payments because of the “pay as you go” system, similar to how taxes are withheld from regular paychecks. For self-employment, you must estimate your tax liability and make quarterly payments on April 15, June 15, September 15, and January 15. If you miss a payment, you could face penalties. You can avoid penalties by meeting certain criteria, like paying 90% of the current year’s taxes. Remember, state taxes may also apply.
Many thanks for everything! This is beneficial. Before, I was totally confused, but this is by far one of the greatest and most comprehensive answers I’ve ever heard. I’m going to print it out. Since I didn’t have any taxes to pay last year and didn’t have any costs, I will utilize the annualized option you mentioned and preserve the entire amount for that year. Once again, thank you, and have a nice day.
As this is your first year of having taxable income, failing to make estimated tax payments will not result in penalties. I’m sure you will have to start doing it in the upcoming year. Make sure you have sufficient resources to cover both your 2024 and 2025 projected tax payments, as they are due in April.
For more details, see the instructions for form 1040-ES.
Your overall income determines your tax rate. What is the real amount you have made thus far, and what is your estimate for the remaining amount after the year?