Quarterly or Yearly For New Daycare?

[tammy]

I have started my daycare with my first permanent daycare client. I did some temporary (summer 2011) work for someone else, but it was for a school aged child that I knew would only be for the summer.
My question is when I tried to look at and do the quarterly tax worksheet I got from the IRS website it was saying to use last year's income as a basis for this year's estimated taxes to pay accordingly. The problem is that this year will be higher than last year and I am not sure how to do this.
I did claim that income last year on my 2011 taxes, so not sure how to proceed from here. Is it ok to file at the end of the year for 2012? Or should I try to pay quarterly? I am not sure how to figure out the quarterly tax worksheet.
Please advise
Thanks!

[Unregistered]

Yearly

I've only paid yearly without a problem. I didn't even know about paying quarterly before finding this forum yesterday.

[Blackcat31]

Welcome to the forum Tammy!

[tammy]

Thanks black cat! I have had this forum bookmarked for a long time and have learned alot, but still figuring out all the tax stuff.

To the other respondent: I am just worried about being hit with a "self-employment" tax or penalty at the end of the year. Not sure how it all works. I am sure my total income will be "small potatoes" but still don't want to pay in more than I have to.

[Blackcat31]

I know nothing about taxes but Tom Copeland will see this question when he comes on line and I am sure will have an answer for you.

[TomCopeland]

estimated taxes

Thanks black cat! I have had this forum bookmarked for a long time and have learned alot, but still figuring out all the tax stuff.

To the other respondent: I am just worried about being hit with a "self-employment" tax or penalty at the end of the year. Not sure how it all works. I am sure my total income will be "small potatoes" but still don't want to pay in more than I have to.

The IRS rule states that you must pay in at least 90% of the tax you owe each quarter or there is a penalty. In your case, using 2011 as a base for determining your 2012 estimated taxes won't work because 2012 will be so different than 2011.

If you have a husband, your husband can withhold more from his paycheck to cover your taxes. If you estimate that you will owe less than $1,000 in taxes, you don't have to file estimated taxes. If you withhold more in taxes in 2012 than you paid in taxes in 2011, you won't pay a penalty for 2012.

A rough rule of thumb is that you will owe 20% of your gross income in taxes for 2012. So, if your parent fees, subsidy money and Food Program reimbursements are $10,000, withhold $2,000 throughout the year. This should be enough taxes and avoid any penalties.

[tammy]

Thanks for answering my question, Tom. I don't have a husband. I've been a single parent for over 7 years now.
Since I am just really gaining clients, I have no idea how much I will be getting in gross income. Right now I have one.
I also teach childbirth classes on the side, which is separate from childcare, of course. So, do they count both together for tax purposes? I am assuming yes.
If I need to calculate both income together, I figure I need to do the income/expenses separately and add only gross and net together for taxes?
Can I simply just go through the gross income and expenses quarterly and pay that? Or can I pay all together at the end of the year again one last time without penalty?
Hope I am making sense. Thanks!

[TomCopeland]

Questions

Thanks for answering my question, Tom. I don't have a husband. I've been a single parent for over 7 years now.
Since I am just really gaining clients, I have no idea how much I will be getting in gross income. Right now I have one.
I also teach childbirth classes on the side, which is separate from childcare, of course. So, do they count both together for tax purposes? I am assuming yes.
If I need to calculate both income together, I figure I need to do the income/expenses separately and add only gross and net together for taxes?
Can I simply just go through the gross income and expenses quarterly and pay that? Or can I pay all together at the end of the year again one last time without penalty?
Hope I am making sense. Thanks!

If someone else is withholding taxes from your childbirth class income, then you don't have to worry about estimated taxes for this income. If not, add this income to your day care income when determining your estimated taxes.
You can either pay in 20% of your gross income (from both businesses) as your estimated taxes, or calculate the net income from both business, add them together and pay in estimated taxes based on the tax rate on your net income. In either case, you need to pay in these taxes quarterly. If you wait until the end of the year to pay any estimated taxes, there will be a penalty.

Two exceptions to this: if you estimate that your total tax bill (for both businesses) will be less than $1,000 you don't have to file estimated taxes. Second, if you pay in estimated taxes in 2012 that are more than the total taxes you paid in 2011, there will be no penalty if you didn't have enough estimated taxes paid in 2012.