You must always set aside money. First, let’s define profit. When you take money from your clients for counseling services, that is your income. When you write a check for rent, that is a business expense. Ideally your income will be greater than your expenses. When your business makes just enough income to pay expenses, we say that it is ‘breaking even.’ There is no profit and so, you may not have any taxes to pay. When you make income that exceeds the amount you need to pay your expenses, then you have made a profit. This is the amount that will be considered when you are figuring out how much to pay in taxes. Here’s how you find your tax bracket and federal tax payments:
- Determine your profit (you just learned how to do that)
- Google ‘IRS tax bracket ______(insert year).’ Lots of helpful websites will pop up including the IRS site. I found this site really helpful for figuring out my tax bracket:
- Determine your filing status (single, married, etc.) and add your partner’s profit/income (or not)
- Now do the math!