Tithing--Self Employed

[heartstrings]

Maybe no t until you've gotten off the ground, paid for the equipment expenses. That's your call.
I tithe weekly, but do my books at the end of the year. After I see what the profit/loss is for that year, I adjust it accordingly.

But I don't tithe on utilities or the customer's materials/consumables.

[HappyChristian]

My hubby has been self-employed for many years, and I was also for a while. I babysat, and he delivers. We had and have a lot of expenses (gas, vehicle repairs ($$$!); housing costs, since I babysat). I have to say that we tithe on our gross, not our net. We believe that we should tithe on all of what we receive, even if there will be money going out for whatever expenses we have. We will be starting a business soon, and will most likely continue that process. As qwerty said, the real thing is to pray about it, and in your case talk to your hubby. I'm sure God will show you what you should do.

As far as taxes are concerned, federally a self-employed person is supposed to file quarterly. If you don't, you can (and most likely will) be fined. We pay once a year, but we pay in advance, with our refund. We find it's easier to get it out of the way - and in some cases, the next year's refund has been larger because we didn't owe when we paid (does that make sense?). State taxes in IN are to be filed quarterly also - don't know if your state is different. But I would suggest you look into it. It would most likely be a bit different for a business than for a minister.

[Anon]

I'll have my husband look into the taxes.

I do already have most of my equipment, I was just using those as illustrations. The only main expenses right now are "legal", "insurance", and then just regular gas, supplies, etc for each cake.

I do not know if I agree with "gross" or not. For instance last year I had a huge cake order from a corporation. They paid me $1000. (BTW I did tithe off of it, just using this as an example). However I think the cakes, gas, and misc expenses were right around $200 out of pocket, possibly a bit more. And, if I paid taxes out of that, it would be even slightly more. So lets just say my net profit was $750. So that would be $100 tithe off gross, or $75 tithe off net. The thing about tithing off the gross is that I would be tithing off supplies I had to actually buy for the order that I would not have bought for any other reason. As heartstrings said...it was "their property", not mine."

As an extreme for instance, say I undercharged a $50 order (or did as a favor). And say it costed me $40 to make, so my net was only $10. Other than the obvious need of raising my prices, LOL, to tithe off the gross would mean to tithe 50% of my net profit.

And thanks Dwayner for keeping it to the 10%ile, that helps alot for this discussion. :wink

[Anon]

BTW I do realize its something each person has to decide for themselves, and my husband and I pretty much already know how we are doing it in light of our other giving and finances...however I thought you all might have other insight I had not thought of, plus its an interesting discussion I don't think we've had before.

[dwayner79]

no problem...

In your example, I would pay $80 tithe... In other words, tithe off of the amount after the $200 expenses but before taxes (because in theory, taxes provide services... )

[Anon]

no problem...

In your example, I would pay $80 tithe... In other words, tithe off of the amount after the $200 expenses but before taxes (because in theory, taxes provide services... )

True.

I asked my husband about the yearly tax thing and he is almost sure that since I will only be filing self employment (not registering as an official business right now, although will be licensed and insured) that I can do that yearly. We had a lady cleaning the church that at one time was filing self employed and did so yearly. We will probably look it up to be sure but...anyway if that is the case, the monthly tithing will work fine because it will disregard any taxes.

[heartstrings]

My hubby has been self-employed for many years, and I was also for a while. I babysat, and he delivers. We had and have a lot of expenses (gas, vehicle repairs ($$$!); housing costs, since I babysat). I have to say that we tithe on our gross, not our net. We believe that we should tithe on all of what we receive, even if there will be money going out for whatever expenses we have. We will be starting a business soon, and will most likely continue that process. As qwerty said, the real thing is to pray about it, and in your case talk to your hubby. I'm sure God will show you what you should do.

As far as taxes are concerned, federally a self-employed person is supposed to file quarterly. If you don't, you can (and most likely will) be fined. We pay once a year, but we pay in advance, with our refund. We find it's easier to get it out of the way - and in some cases, the next year's refund has been larger because we didn't owe when we paid (does that make sense?). State taxes in IN are to be filed quarterly also - don't know if your state is different. But I would suggest you look into it. It would most likely be a bit different for a business than for a minister.

You only have to file income tax quarterly if you are a incorporated. If you are a sole proprietor, in my case, only yearly.
In Florida, we have to file sales tax depending gross sales. Smaller business can get by quarterly. We have to do our sales tax monthly.

Let me give you an example of tithing on the gross....
Most of the stuff we sell, is manufactured by us, but sometimes we outsource. We sold one unit to a client for $5000. This item cost us $3600. ....We took the client's money and purchased his product for him. So instead of tithes being $140 on the gross profit, by what you are saying they should be $500. That's tithing 35.7%. We made $1400 bucks and paid our gas, insurance, electrity and phone bill, out of that. We did not have a $5000 increase; we simply bought the client's goods for him using his money. the $3600 was never ours.....

To put that in another perspective...
Suppose you had ten(10) such $5000 sales a year with a gross profit of $1400 each and that was all the sales you made for the year. With me?
If you tithe $500 off each sale, you had $50,000 in annual sales, so your tithes for the year come to $5000.
Was your total income for the year $50,000? Nope
You actually grossed $14000 for the year, tithed $5000, and have $9000 to live on for the year...out of which you take business expenses.....what happened to the 50,000?
You tithed on $36,000 of it which was never yours to begin with.

[5dumplings@home]

My husband is fairly up on taxes and told me filing self employment once a year is okay...

Okay I could see that I should tithe on the mixer amount...that one was probably stretching it.

I definitely do not tithe on my "per-cake" expenses...for instance if it costs $50 to make a cake and I get $200 for the cake, then I am only tithing on $150. My main question was whether or not I should take out all business expenses before tithing or not.

BTW Jerry my dad always tithed on gross but then not on tax returns.... we personally tithe on net and then tithe on tax returns. Works out the same I think.

I would double check to be sure about that, because we filed as self-employed when I was teaching and it was required quarterly.

[heartstrings]

Depends on your situation, income etc. If you owed the previous year, they will require quarterly.
I've been in business 14 years and I file my income tax and self employment tax once a year. I file sales tax monthly.

[dwayner79]

I would double check to be sure about that, because we filed as self-employed when I was teaching and it was required quarterly.

Depends on the state, but in NJ, I had to do monthly sales tax returns even if it was small.

wrt the bolded part: That would not be the same. Lets assume you make $50,000/year and pay throughout the year $10,000 to the government. You would have tithed on 40,000. Then you get a $3,000 rebate, and tithe on that. You have tithed on $43,000, but you earned $50,000. The other 7k you paid in taxes to the government to provide you certain services (just like you pay the car mechanic... but it happens automatically). From a tithing POV, you should really tithe on the $50,000 up front and not tithe on the tax return.

[Anon]

I don't think I have to charge sales tax yet but I'm not sure...still looking into all that. I think the sanitarian may know alot to help me too.

[Anon]

http://www.irs.gov/publications/p505/ch02.html#d0e4506

According to this I don't have to file estimated tax if my taxes will not exceed $1000....which would mean approx $15,000 in income, no way I'll make that this year in cakes.

Right?

[qwerty guy]

According to this I don't have to file estimated tax if my taxes will not exceed $1000....which would mean approx $15' date='000 in income, no way I'll make that this year in cakes.[/quote']

I pay almost %40 in taxes... if they have a $1000 level for quarterly, for me that would mean making $4,000... Maybe you should get a tax guy and give him a buisness plan?



Most places don't sales tax food, but define food different. Potato chips are taxed in most states, but bread is not. Ask the tax guy I mentioned above if you would be considered a caterer (tax free sales in most places) or retailer (sales tax could happen)



HUH!?!?!?
10x 5000 = 50,000
10% of 50,000 is back to 5000
Grossed 14,000? WHAT? Gross is total inflow.... that would be 50,000
Where did 14000 even come from?
I have no idea what you're talking about here....

Ok you make 10 sales of $5000, your gross is 50,000
Tithe on gross, would be $5000, leaving net to date at 45,000
If it takes $1000 pr cake, you have $10,000 in expences, your net to date is 35,000
Overhead lets just say $5,000 (machines, electric, permits, gas) Net to date is 30,000
Advertising? what's your budget? lets say $3,000 for flyers, community newpapers...

Net to date, and total net, you'd make 27,000 for the year, and that's with tithe on gross for those 10 sales

If you tithe on net, (50,000-10,000-5,000-3000) you tithe on 32,000..
3,200 in tithe, end of year you have 28,800... 1,800 more then if you tithe on gross
But your tithe is 1,800 less

That's only a 6% increase in the money in your pocket by going net instead of gross
that's a 36% reduction in your tithe though.

For you to increase 6%, you decrease God 36%

Would you be so upset about a $27,000 net, that you wouldn't be happy unless it's a $28,800 net?

What if the machine you buy that you don't tithe on because it's an "expense" breaks? Wouldn't it be better to have God involved it in working correctly for you?

What about customers that don't pay? You tithe net to gain $1,800 and one customer doesn't pay you, and you're out $5,000 (in this example) Would you wonder why you're going through such a trial when that happens?

I'm not trying to preach, I'm just pointing out real math and real thinking as far as how deeply you want God involved in this.

pray pray pray pray pray. Take what you've seen here so far, and bring up these arguments with God so he can bless you with the wisdom of what He would like you to do.

AND GOOD LUCK!!!!!!!!!!!! in all this talk of tithing, it's been going over all our heads you're starting a legit buisness! WoOt I hope it not only is profitable for you but very fun doing it!

[Anon]

Thanks Qwert.... and I know I'm definitely not retail, I would definitely qualify as catering.

I think the $1000 tax was per year...my math could be wrong, but if income tax is 15.3% that would mean I'd have to make roughly $15,000 per year in order to have to pay out $1000 in tax...right? Which I'm not going to make.

How expensive is a tax guy? I can barely afford insurance much less a personal accountant. I"m already starting the year in the hole due to business expenses, slight as they are for doing this from home.

[qwerty guy]

well, first off... starting in the hole is something that might be avoidable, we should talk on IM or PM. Every buisness I started I made the red minimum.

Getting tax infromation might be as little as a $50.00 meeting. If you have a buisness plan, projections, maybe 100-200? Some do it free cuz they just don't have that much work and wanna build a relationship hoping to see you in the future when you really need them.

if you're at 15%, about as low as you can go before you're tax free, then for every dollar, you owe .15. For every hundred, 15 bucks. For every 1000, you owe 150.

for 10,000, you would need to pay 1500. For 15,000 (our example) you would owe about 2000.

Tax brackets matter though. I never give to God less then what I give the government, and being at almost %40 in taxes, the only thing that keeps me eating steak is the fact that by giving to God, I get taxes back lol. Total win win.