What Should You Charge Customers?

Many micro business owners struggle with what to charge for their services or products. If they charge to much they may never attract customers, but if they charge too little they may not cover their costs or make a decent profit.

Ten Dollar bills

Here are some tips for setting a price that you and your customer can live with.

  • Market survey-Ask your potential clients what they are willing to pay. You may be surprised at what some people will pay for your unique service or product.
  • Competitor price-Learn what your competitors charge. You can ask them directly or ask customers what they have paid in the past. A teenager giving piano lessons asked several other teenagers and parents about the going rate for beginning piano lessons to help her set her price.
  • Cover your costs-You must know what your costs are and then add more to cover taxes and your desired profit. One unlucky micro business owner only charged enough to cover her costs and forgot about taxes and making a profit to grow the business, let alone paying herself.
  • Don’t forget taxes– Work with an accountant to calculate what you will owe in federal, state and local income taxes. As a micro business owner you will also be paying self employment tax to cover social security and medicare. CPAs frequently tell small business owners to allow for 25-35% of their profit to pay for taxes.
  • Value your time-Some micro owners charge by the hour they are with a customer (such as tutoring by the hour), but fail to realize that they spend many hours outside of customer time. Travel time and preparation time should be considered when you set an hourly rate.
  • Adjust when needed-Adjust your prices if your costs increase, or if you find you are seriously under priced compared to your competitors. Also increase your prices if you find your product or service is in demand.
  • Adjust as you gain experience-An experienced worker is more valuable than a new one. After a few years of doing bookkeeping, a micro business owner made a plan to increase her rates for current clients over a three year period, but she charged new clients the higher rates from the start.


My book, Money and Taxes in a Micro Business will help you understand taxes!

Carol Topp, CPA is the author of the Micro Business for Teens


Would the Micro Business for Teens books be helpful for adults?

I was just wondering if this curriculum could be used as a starting point for an adult who is interested in starting a micro business? Also, could the tax information be used as well?

Dear Alicia,

Yes, the Micro Business for Teens books are frequently read by adults. One adult who has owned micro businesses in the past told me she learned something new.


The Money and Taxes book book will be helpful to adults as well. It covers creating important financial statements, cash flow, how to increase your profit, sales tax, hiring and paying workers.

The chapter on taxes applies to adults and teenagers, because the tax code is the same for teenagers and adults, so it should be helpful to you.


Carol Topp, CPA

What Teens and Recent Grads Need to Know About Money


Managing money is a valuable life lesson. In Carol Topp’s podcast she discusses what teenagers and recent graduates need to know about managing money.

Listen to the podcast

This Handout lists helpful resources for teaching teenagers about managing money.


Carol’s also has a 4-part podcast series on teaching kids about money:

Episode 7: Teach Preschoolers About Money

Episode 8: Teach Kids About Money

Episode 9: Teach Pre-Teens About Money

Episode 10: Teach Teenagers About Money


Career Cover-100px

Carol’s newest book Career Exploration for Homeschool High School Students is available in print and ebook format. Learn more.

What Kids Need to Know About Money


Learning to managing money is one of the most important life skills.

In episode 45 of the Dollars and Sense Show podcast, host Carol Topp discusses how to teach kids about managing money. Carol explains the important lessons to teach young and elementary age children.

Listen to the podcast

This Handout lists helpful resources for teaching kids about managing money.

If you enjoyed this podcast, you might be interested in Carol’s 4-part podcast series in teaching kids about money:

Episode 7: Teach Preschoolers About Money

Episode 8: Teach Kids About Money

Episode 9: Teach Pre-Teens About Money

Episode 10: Teach Teenagers About Money


Career Cover-100px

Carol’s newest book Career Exploration for Homeschool High School Students is available in print and ebook format. Learn more.

Video: Taxes for Micro Business

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Sign up for my newsletter and I will send you my report, New Biz on the Block: Starting a Micro Business in Your Neighborhood.

In the video above, I explain the 3 different types of taxes that you may have to pay in your micro business.

The first tax explained in the video is federal income tax. The threshold in 2014 for federal income tax is: $6,200 in earned income (which is the profit from your micro business, not your total sales). I also explain in the video that parents are still able to claim their child as a dependent, even if the student makes their own income. It’s important for teenagers to file their own tax return, separate from their parents’ tax return.

The second tax explained in the video is self-employment tax. This is Social Security and Medicare taxes for self-employed people, like business owners. This tax is 15.3 % of profit over $400. Many teenagers may owe self employment tax on their profits form a micro business, but not owe any federal income tax.

Finally, I explain that a micro business owner may need to collect and pay sales tax to their state government if they sell a product to the final consumer.

For more information about taxes on teenagers, visit TeensandTaxes.com

Money_smalland read my book Money and Taxes in a Micro Business available at  MicroBusinessForTeens.com

Carol Topp, CPA

Tax tips and tricks for teen entrepreneuers


Kenneth over at Teen Business Forum asked,

My name is Kenneth and at the moment I am a freshman in college. As you probably already know, tax season is here! I do plan on filing them soon, but I was wondering what tips and tricks I could do to increase the amount of the refund.


Tips: Read all you can about tax deductions. My blogs at http://TeensAndTaxes.com and http://TaxesForWriters.com are a good place to start.

Buy my ebook Teens and Taxes at http://TeensAndTaxes.com. The $3 cost is a business deduction!

Keep good records. Consider using accounting software like Quickbooks, Outright.com, Freshbooks.com or Wave accounting.

Tricks: Keep track of mileage. It’s a bigger deduction than just gas.

If you travel out of town you can deduct a per diem amount for meals that is higher than actual meal expenses (unless you’re a really big eater!).

The standard rate of $46/day for meals is set by the General Service Administration which has higher per diem rate for high-cost cities. On the day of traveling to and from home, you can only deduct 75% of the per diem rate, but it still adds up.

For a trip to Orlando (with a per diem rate for meals of $56/day) my per diem totaled $196, a lot higher than my actual expenses of $94.97.

Hope that helps.

Money_small-259x300Money and Taxes in a Micro Business has several chapters devoted to federal , state and sales tax. There’s quite a bit to learn about taxes, but this book is written in clear English so a teenager easily can understand taxes in running a micro business.


Carol Topp, CPA


Get a 1099MISC? How the IRS will tax you.

Form 1099-MISC for 2010 with calculator and pencil on it

If you received a Form 1099MISC then you worked as an independent contractor sometime last year.

The IRS considers independent contractors as business owners.

You will need to file your own tax return. If you’re a teenager you need to prepare a separate tax return from your parents.

Tell your parents not to panic, they can probably still claim you as a dependent!

Report the income from the 1099MISC on Schedule C Business Profit or Loss.

You may not owe federal income tax (if your total income is under $6,100 on 2013), but will owe self-employment tax at 15.3% of your net income.Ouch!


I cover this in detail in my ebook Teens and Taxes including an example with the forms filled out.

It’s worth the $3 to do it right. Buy a copy here.

And read this blog post from another parent whose son received a Form 1099MISC.


Carol Topp, CPA

P.S. If you think you should have been treated as an employee and not an independent contractor, you can complain to the IRS. I cover all that in the Teens and Taxes ebook. Here’s an excerpt.

What’s new in taxes for teenagers?


Teens and taxes ebook available at TeensAndTaxes.com

Not a lot changed in the US tax code for teenagers for 2013, except a few thresholds:

Income tax is paid on earned income greater than $6,100 in 2013 (up from $5,950 on 2012)

Income tax is due on unearned income (usually investment income like interest and dividends) over $1,000 in 2013 (up from $950 in 2012).

The tax for teenagers with both EARNED and UNEARNED income are more complex. The guidelines involve comparing a teen’s gross income (meaning their total income from all sources) to the greater of

  • $1,000 or
  • earned income plus $350 (up from $300 in 2012).


If you purchased the Kindle version of my ebook, Teens and Taxes, be aware that it is based on 2012 thresholds. Just keep in mind these 2013 thresholds when preparing a teenager’s tax return.


Carol Topp, CPA


Free tax software for teen business owners



There are several sources for you to file a teenager’s tax return for free:


Tax Act is the software I use. I use the package for professionals, but you can try their free version: https://www.taxact.com/


IRS Free File e-badge
The IRS partners with several software providers in the Free File program: http://www.freefile.irs.gov/


For more information on taxes for teenagers visit my other website TeensAndTaxes.com


What do I need to know about crowd funding and taxes?

crowd surfer © by Photos by Mavis

Question: I’m interested in accepting donations from a crowd funding website. What do I need to know about the taxes?

I’ll do my best to answer your questions, but I have to include this disclaimer:

The Internal Revenue Service hasn’t published specific guidance on the tax consequences of receiving money through crowd funding sites like Kickstarter.

I’ll also explain that I am a very conservative CPA. I do not take risky or unsupported positions. You may get a different answer from another CPA or tax professional.

As the term suggests, crowdfunding is funding from a crowd of people; that is, many people provide small amounts of money to finance something. Crowdfunding has its roots in charitable causes, including the advent of microfinancing to provide financial services to poor people, but has progressed to the online funding of creative and other projects via sites like Kickstarter and Rockethub.

Crowd funding income can be treated as the following:

  1. A donation to a 501c3 tax exempt charity.
  2. Investment in a business by an investor seeking a share of ownership (called equity owners)
  3. Gift given by an individual to an individual. Gifts are typical when no business or potential profit motive is evident. Examples of gifts include a wedding, funding an adoption, helping a family whose house was destroyed by fire or a person with a medical illness.
  4. Taxable income for a for-profit business. Most businesses give a reward in exchange for the income. This reward may be considered a sale of a good and subject to sales tax in your state (and you thought all you had to worry about was federal income tax!)


For a micro business owner, #1 and #2 do not apply. It is my opinion that #3 Gift does not apply to micro business owners either

#4 taxable income is the only option that applies to micro businesses launching a crowd funding campaign.


Carol Topp, CPA

Here is my disclaimer:

Nothing contained in this email was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code, as amended; (2) any written statement contained on this website relating to any federal tax transaction or matter may not be used by any person to support the promotion or marketing or to recommend any federal tax transaction or matter; and (3) any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor with respect to any federal tax transaction or matter contained in this website. No one, without our express written permission, may use any part of this website in promoting, marketing or recommending an arrangement relating to any federal tax matter to one or more taxpayers.