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How do I prepare myself to pay taxes properly?

I currently have three sources of income. I help my friend with his carpet business (cleaning and installing). He pays me cash and to my knowledge he doesn't file taxes. I play music gigs, mostly for cash but occasionally fill out a 1099? form and payed check. I also buy and sell items on craigslist. I live in San Diego, California. I'm wondering how I go about doing this properly so it doesn't catch up with me later. I assume I keep records of all my income - perhaps seperately for the three different incomes. I also assume I keep track of expenses - not sure what those might be. My main expense is driving to and from jobs, but I dont' really have a home office so I think I'm just commuting. Should I declare myself as a small business with the city? Any info or leads for more info would be appreciated! Thanks -Larry Even though I have three business's I should just create one limited liability? Do I need to file taxes half-way through the year?

Public Comments

1. You assume right about keeping good records of your income and associated expenses, and keep them separately for the three different "businesses". For each of the three you'd file a schedule C showing your income and any associated allowable expenses, and file one schedule SE to calculate your self employment tax. The numbers from the bottom of the schedules will go onto a form 1040 (not 1040EZ or 1040A) to calculate your total tax owed.
2. Yes, you should. Being a small business protects your family legally. Limiting liability should be your primary concern, as liability has no upward limit. Christopher Dixon www.leroybrownbooks.com