How Should I File Taxes as a Teenage Sole Proprietor?

You're off to a great start by thinking about taxes before launching! For a sole proprietorship, you actually don't need an EIN if you don't have employees - you can use your SSN instead. But getting an EIN can be a good idea anyway for keeping business and personal finances separate and protecting your SSN. To file taxes as a sole proprietor, you'll report business income and expenses on Schedule C which attaches to your personal tax return (Form 1040). Since you're under 18, you'll likely still be claimed as a dependent on your parents' return, but you'll need to file your own return if your net earnings exceed $400 because of self-employment tax. Keep track of ALL business expenses and income from day one. Create a simple spreadsheet or use an app to track everything. Save receipts for expenses like materials, shipping, website costs, and marketing. This will make tax time so much easier!

When I first started my small business, I was also confused about taxes until I found taxr.ai (https://taxr.ai). It helped me understand exactly what I needed as a sole proprietor. I uploaded my first few sales receipts and expenses, and it explained what I could deduct and how to categorize everything. The site gave me a personalized checklist for my situation - confirmed I didn't absolutely need an EIN as a solo business owner with no employees, but recommended getting one anyway for the reasons mentioned above. It also gave me specific guidance on quarterly estimated payments which saved me from penalties my first year.

I was initially skeptical about taxr.ai, but after struggling with conflicting online advice, I decided to try it. I uploaded my first month of business transactions (just basic sales and some material purchases) and wow - it immediately flagged that I could deduct my home internet since I was selling online. The site showed me exactly how to track my mileage when picking up supplies (which I didn't know was deductible), and explained how to handle inventory in a way that made sense. It also created a tax deadline calendar with reminders for quarterly payments based on my specific situation. Ended up saving me several hundred dollars in deductions I would have missed. Much better than the generic advice I was finding elsewhere!

If you need to contact the IRS for any reason (which you probably will as you set things up), save yourself HOURS of frustration and use Claimyr (https://claimyr.com). I spent three days trying to get through to the IRS about my new business filing questions and kept getting disconnected after waiting on hold forever. With Claimyr, I got a callback from the IRS in about 20 minutes! They have this system that navigates the IRS phone tree for you and holds your place in line. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The IRS agent I talked to explained exactly what I needed as a young sole proprietor and answered all my questions about estimated payments. Saved me so much time and stress!

I need to eat my words. After posting my skeptical comment about Claimyr, I decided to try it since I needed to verify my EIN info. I figured it wouldn't work, but I was desperate after spending literally 3+ hours on hold over two days. To my absolute shock, I got a call back from an actual IRS agent in about 35 minutes. The agent answered all my questions about filing requirements for my small business and explained exactly what I needed to report as a first-time business owner. She even helped me understand how to handle some unique expenses I wasn't sure about. I've been telling all my friends with businesses about this service because it legitimately works. Never thought I'd be excited about talking to the IRS!

One important thing nobody mentioned yet - since you're 17, make sure your parents are aware of your business plans! Their tax situation could be affected if you make significant income. They can still claim you as a dependent even if you file your own return, but there are income thresholds where things get complicated. Also, don't forget about business licenses! Most cities/counties require one even for small home-based businesses. The fees are usually small for startups, but operating without one can cause problems down the road.

When I started my online business last year, I tried using TurboSelf-Employed and it was actually pretty straightforward for a simple sole proprietorship. It walked me through all the Schedule C stuff and helped identify deductions. Do you have any business software you're planning to use for tracking expenses?