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I plan to do a project for $15,000 and the check will be written out to my name. I don't have a dba, llc , etc... since this isn't common for me and I'm used to going through another company.

I assume it needs to be taxed, how do I go about doing so?

I also heard that it can trigger a red flag due to such a large amount? Any way I can prevent that?

In a nut shell I need some guidance on how to keep issues forming in the future. I don't plan to get a dba or anything as this is not common enough nor to time (plan to get paid tmw).

Any help is appreciated.

Is it matters, I stay in Michigan...

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    Depositing a $15,000 check should not raise any red flags, that would only be if you are depositing cash according to the Bank Secrecy Act. And as long as you properly report and pay taxes on the income it shouldn't matter anyway.
    – Craig W
    Commented Mar 16, 2013 at 18:24

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You should consider some tax planning prior to engaging in such operation. For example, you will pay less underpayment penalty for earnings you received without withholding or paying with 1040-ES in December, than in January.

Since it is a case of self-employment, you need to analyze your own expenses, which can be deducted from the income. You should also plan when to make these expenses, so that it will be optimal for you both business wise and tax-wise. It may be that you receive a $15K check, but only half of it is taxable, because you expense your materials, office, mileage, meals, etc etc. You should consult a professional EA or CPA about what and how can be deducted. Some deductions are limited, others have strings attached, and some may trigger an audit. You can see the Schedule C instructions for details.

You'll be liable for self-employment tax: social security and medicare taxes that you usually pay through your W2 employer. The W2 employer would pay half, so in the case of self-employment you'll be paying your own half, and the non-existing employer's half. Depending on your other income, it may be that not all of the $15K will be subject to the Social Security tax, there's an annual income cap. But assuming you'll be liable on the whole sum, you should make sure to set 12.4% aside ($1860 from the full amount just for the SE tax).

If you end up at the end of the year with tax liability of more than 100% of the previous year, and you only paid with withholdings or form 1040-ES payments less than 90% - you may be penalized and charged interest on the underpayment.

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It can trigger a red flag for, say, paypal. but it is not a red flag to any regulatory body. you have to withhold your own income taxes and self employment tax, and pay estimated quarterly taxes (or pay the minuscule penalty).

hope that helps.

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    If you have a regular W-2 job you could alternatively increase your withholding (via Form W-4) there instead of paying estimated quarterly taxes.
    – Craig W
    Commented Mar 16, 2013 at 18:28
  • see my response to money.stackexchange.com/questions/21022/… for the withholding issue. Commented Mar 16, 2013 at 18:50
  • not so minuscule, for a significant underpayment it can be hundreds and thousands of dollars.
    – littleadv
    Commented Mar 17, 2013 at 0:34

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