How does Schedule C work and what tax percentage do I owe on self-employment income?

Wait, so they'd be paying both the 15.3% PLUS regular income tax rates? That seems like a lot! Are there any other deductions tattoo shop owners typically take that might help lower that taxable income? Also, should they be making quarterly estimated tax payments?

Yes, you pay both types of tax on your business profit - that surprises a lot of new self-employed folks! For tattoo shop specific deductions, make sure you're tracking all supplies, equipment, portion of your phone/internet used for business, professional development, licensing fees, and insurance. Regarding quarterly payments, absolutely you should be making those. Since there's no employer withholding taxes from your income, the IRS expects you to send estimated payments four times a year (April 15, June 15, September 15, and January 15). If you don't, you might face underpayment penalties when you file your annual return.

Does it actually help with calculating quarterly estimated payments too? That's what kills me every year - I never know how much to send in each quarter and always end up with a surprise bill.

I'm curious - does it handle things like asset depreciation? I bought a lot of expensive equipment for my business last year and had no idea how to handle writing it off over time vs. all at once.

It absolutely helps with calculating quarterly estimated payments! It runs projections based on your current business income and expenses, then tells you exactly how much to pay each quarter to avoid penalties. It's saved me from those nasty surprise bills too. Yes, it definitely handles asset depreciation! That was one of my biggest pain points too. It automatically identifies which assets qualify for immediate expensing under Section 179, which need to be depreciated over time, and even handles special depreciation provisions like bonus depreciation. It even reminded me about the vehicle depreciation limits I would have completely missed otherwise.

How does this actually work? Do they have some special connection to the IRS or something? I've literally spent DAYS on hold with the IRS and never got through.

Sounds like a scam tbh. Nobody gets through to the IRS that quickly. What did this miracle service cost you? Probably more than it was worth...

The service works by using technology to navigate the IRS phone system and wait on hold for you. They basically call the IRS, wait through all the prompts and hold times, and then call you when they're about to connect with a live person. It's totally legit - no special connection to the IRS, just a smart system that does the waiting for you. I had exactly the same experience as you - spent multiple days trying to get through with no luck. I was honestly shocked when I got a call back saying an IRS agent was on the line. It was such a relief to finally get my Schedule C questions answered directly from the source.

Thank you for mentioning this! I hadn't even thought about the loan implications. Do lenders typically look at your net profit or your gross income when evaluating self-employment income? I'm hoping to buy a house next year so this is super relevant.

Lenders typically look at your net profit (the bottom line of your Schedule C) when evaluating self-employment income for loans. They usually want to see at least 2 years of consistent or increasing income on your tax returns. Some lenders may also ask for profit and loss statements in addition to your tax returns, especially if you're applying for a loan in the middle of a tax year. They're trying to verify that your current income is still in line with what you reported on previous tax returns.

How does that work with the booth rental model though? I've heard mixed things about whether rental income qualifies for QBI.

Good question! The booth rental income should generally qualify for the QBI deduction since you're actively managing the tattoo studio business. The key is that you're providing services beyond just being a passive landlord - you're maintaining the space, handling business operations, and likely providing some level of management. However, the income limits and business type restrictions can get complex. With $70k in profit, you'd likely be under the income thresholds where it gets complicated, but definitely worth having a tax professional review your specific situation to make sure you're maximizing this deduction properly.

This is such great practical advice! I'm just starting my own small business and the 30% rule sounds like a lifesaver. Quick question though - do you put that 30% aside from gross income or net income after business expenses? I'm trying to figure out the right percentage to set aside since I have pretty high monthly expenses for my startup costs.