Started Your Own Business? Time To Figure Out if You Owe Taxes!

05/19/2010

As we told you in our last post, starting your own business is a great way to make money doing something you enjoy and are good at. Check out some of the things these teens have done! One of the biggest responsibilities in running your own business is to pay taxes if you owe them.

As a part of your research, look into the laws in your state that apply to teens who are self-employed or considered household employees. Here is the difference between the two:

• Household Employee: According to federal law, the work you do in someone else’s house and following their instructions (babysitting, lawn mowing, etc.) would generally qualify you as a “household employee.” If you’re under 18, that means you (and the person who hires you) likely won’t have to pay taxes on what you earn.
   
• Self-Employed: If you offer a service where you have many clients, bring your own supplies or equipment, and have a lot of control over how your work is done, you may be considered “self-employed.” Self-employed people who earn more than $400 in taxes in a year should file a federal tax return.

If you fall under one of these two categories, take some time to look at information on self-employment or ask an adult to help you understand the basics.

For more information on self-employment, go to: http://www.socialsecurity.gov/pubs/10022.html, and to learn about whether you’re a household employee, check out: http://www.ssa.gov/pubs/10021.html.

Whether or not you are running your own business, taxes will likely factor into your first job. Mastering them now will put you way ahead of your peers!