Taxing Small Business

Obviously, there was no withholding on that self-employment income, so be prepared to pay a federal, and possibly state, tax bill. You could ask your employer to withhold more taxes from your wages to cover the amount due on your self-employment income next year. If your withholdings do not cover your tax obligation, you must file a quarterly estimated payment.

To avoid that problem next year, Turbo Tax, a division of Intuit(INTU Quote), will help you calculate a quarterly estimated payment. For the first year of self-employment, the IRS gives you a pass on those estimates, but in subsequent years you must make quarterly payments. To be safe, you should base them on 100% of your previous year's tax, or 110% if your income was over $150,000.

TurboTax for Home & Business costs $89.95, whether you buy if from a local retailer or download it. Included in the price is one state tax program, which you must download. You can file your tax return electronically for an additional $14.95. That will get you your tax refund faster. And if you need to include a check for that extra income when you e-file your return, you'll be given a form to print out and mail along with your check for taxes owed. Or you can have the IRS automatically debit your bank account.

Making money on your own small business is a great use of your entrepreneurial talents. But it also complicates your tax filing. Thank goodness you don't have to spend all your profits complying with the tax laws.

TaxCut, a competing program offered by H&R Block(HRB Quote), also offers a home and business version to help you through Schedule C and your 1040. It's available for $79.95 here.

And that's the Savage Truth.