“Should I be depositing the money into the new business account?”--->Basically, it depends on the situation and it is up to you. However, I guess so; you should definitely open a separate checking account for your business; In an IRS publication, you are urged to open a business checking account. A separate business checking account is not a strict requirement. As long as your records are accurate one checking account is perfectly acceptable to the IRS.” Though it is not a strict requirement it is still a good idea.You may, if you want, open a separate checking account in the name of your SMLLC or business. You may also deposit all your business income to this account and pay all business related expenses from it. Avoid using your personal checkbook for business activity and try not to pay personal bills from the business account. If the balance in the LLC account is low, you can loan money to the business, reimburse yourself for cash payments, automobile use and home office use, and pay yourself a drawings by writing a check from the LLC or business account. Banks won’t allow you to open a business account simply because you want one.As you said, being a sole-proprietor and owning an internet business or an eBay store is usually enough to qualify you for a business bank account.
“ If so, should I deposit the previous checks into the new business account to account for all income received?”--->I guess so as long aas you keep a separate checking account for only business purposes.
“ Also, how do I use the income to pay my mortgage and personal expenses?”--->You need to pay your personal expenses from your personal use checking account. You can deduct your mortgage interest expenses on 1040 Sch A as long as you itemize deductions on your federal return.
“ Do I transfer money from the business account to my personal account?”--->I don’t think so; as you can see, one of the most important things you can do when you own a business is separate your business and personal income. This is important for many reasons, the most important of which are to make things much easier when filing your taxes, and it is beneficial if you ever decide to sell your business.
“ If so, how much or what percentage?”--->As said above.
“ Can I use the business account for personal expenses?”--->No, I don’t think o either as said above.
“ If I have travel and cell phone expenses, do I pay this out of the business account and not my personal account?”--->I guess it depends on the situation; as long they are your business related expenses, you neeed to pay them from your business checking account.
“ What are the risks in filing my taxes at the end of the year if I choose not to open a business account and deposit all my income and pay all my expenses out of my personal account?”---> Over 200 million tax returns are processed every year and even though less than 2% of these are audited. The IRS can actually audit you up to three years from the date you last filed your tax return; six years in some cases. Although it is a closely guarded secret just how the IRS singles out certain tax returns to be audited, there are two basic methods they use. Every year, a number of random audits are undertaken for each taxpayer group, which includes corporations, individuals and small businesses. If you are randomly selected for an audit, there is little you can do to avoid the process. However, audits are also conducted on the basis of various ‘red flags’ on tax returns which help to alert the IRS to possible error or fraud. Income is one; in general, the higher your income, the greater your chances of being audited; in particular, individuals who earn over $200,000 a year are more likely to be audited. Owning your own business or being self-employed are other red flags; the IRS assumes – rightly or wrongly – that someone who is self-employed is more likely to make mistakes on their tax return, or is more likely to under report their taxable income.
“How do I go about paying my estimated taxes? Do I have to pay them monthly or quarterly? How do I calculate the amount due?”---> As long as the amount on Sch SE line 4, for short schedule of Sch SE,is $400 or exceeds $400, then you need to pat SE tax, self-employment tax; the 2010 Tax Relief Act reduced the self-employment tax by 2% for self-employment income earned in calendar year 2011. The self-employment tax rate for self-employment income earned in calendar year 2011 is 13.3%, NOT 15.3%.Also,as you are filing as a sole proprietor and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return.However, you do not have to pay estimated tax for the current year if you had no tax liability for the prior year;you were a U.S. citizen or resident for the whole year;your prior tax year covered a 12 month period. If you are subject to estimated taxesd, then you need to pay quarterly estimated taxes. If you do not pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due a refund when you file your income tax return. Generally, you will avoid this penalty if you owe less than $1,000 in tax after subtracting their withholdings and credits,as said above, or if you paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.
Please visit the IRS Websites here;
Self-Employment Tax (Social Security and Medicare Taxes) Estimated Taxes
“I recently got married in March 2011 and wanted to know the best way for my husband and I to file our taxes for 2011. Is it better if we file "married but filing separately" or "file as married"? What's the difference?”---> As you know it very well, in genral, he MFJ filing status provides more tax benefits than filing separate returns, but taxpayers will need to weigh the pros and cons and decide for themselves which is the best filing status. By filing a joint tax return, both spouses report all their income, deductions, and credits. Both spouses must sign the return, and both spouses accept full responsibility for the accuracy and completeness of the information reported on the tax return. Both of you may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. One spouse may be held responsible for all the tax due even if all the income was earned by the other spouse. Filing a separate return provides relief from joint liability for taxes. However, married taxpayers who file separately are not eligible for many tax deductions and credits, and have higher tax rates. In general, it is more advantageous to file a joint return.
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