Don't Forget Social Security
So you hired an accountant, kept meticulous records, and your return appears to be shaping up nicely. "Big deal," you think. "I only made $5,000 this year, so I won't owe any tax."
As a home business owner, you're self-employed. That makes you responsible for Social Security tax, reported on Schedule SE. (You paid half this rate while employed by someone else. Your employer kicked in half of this tax, which might be why it seems more painful to pay it now.) That's right. Even if you made a relatively small amount of money for the entire year, you still owe self-employment tax of 15.3%.
And if you made more money, don't overlook this piece of your tax obligation. Let's say you made $40,000 after expenses. That's a pretty modest amount, right? Your self-employment tax will be roughly 15%, or $6,000. You need to take this percentage into account not just on April 15, but when making your quarterly payments to the IRS during the course of the year. If you wait until you file your annual return to consider this tax, you could be faced with penalties for underpayment (and perhaps more scrutiny in the future).