Information courtesy of IRS.gov
Do you own your own business? Are you a sole proprietor or independent contractor? Here are six tips about income from self-employment.
- SE Income. Self-employment can include income you received for part-time work. This is in addition to income from your regular job.
- Schedule C or C-EZ. There are two forms to report self-employment income. File a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040. You may use Schedule C-EZ if you had expenses less than $5,000 and meet other conditions. See the form instructions to find out if you can use the form.
- SE Tax. You may have to pay self-employment tax as well as income tax if you made a profit. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE to figure the tax.
- Estimated Tax. You may need to make estimated tax payments. People typically make these payments on income that is not subject to withholding. If you don’t pay enough tax throughout the year, you may owe a penalty.
- Allowable Deductions. You can deduct expenses you paid to run your business that are both ordinary, an expense that is common and accepted in your industry, and necessary, expense that is helpful and proper for your trade or business.
- When to Deduct. Usually, you can deduct expenses in the same year you paid for them, or incurred them. However, you must ‘capitalize’ some costs.
We are available to help you sort through your self-employed income.
