refigure your estimated tax for the next
quarter. If you estimated your earnings too low, again complete another Form
1040-ES worksheet to recalculate your estimated taxes for the next quarter.See the Estimated Taxes page for more
information. The Self-Employment Tax page has more information on Social
Security and Medicare taxes.
To file your annual tax return, you will need to
use Schedule C or Schedule C-EZ to report your income or loss from a
business you operated or a profession you practiced as a sole proprietor.
Small businesses and statutory employees with expenses of $5,000 or less may
be able to file Schedule C-EZ instead of Schedule C. To find out if you can
use Schedule C-EZ, see the instructions in the Schedule C-EZ form.In order to report your Social Security and Medicare taxes, you
must file Schedule SE (Form 1040), Self-Employment Tax.
Use the income or loss calculated on Schedule C or Schedule C-EZ to
calculate the amount of Social Security and Medicare taxes you should have
paid during the year. If you
made or received a payment as a small business or self-employed individual,
you are most likely required to file an information return to the IRS.
When beginning a business, you must decide what
form of business entity to establish. Your form of business determines which
income tax return form you have to file. The most common forms of business
are the sole proprietorship, partnership, corporation, and S corporation. A
Limited Liability Company (LLC) is a relatively new business structure
allowed by state statute.
If you use part of your home for business, you may
be able to deduct expenses for the business use of your home. The home
office deduction is available for homeowners and renters, and applies to all
types of homes.
The employment tax requirements for family
employees may vary from those that apply to other employees. On this page we
point out some issues to consider when operating a husband and wife
business. For tax years
beginning after December 31, 2006, the Small Business and Work Opportunity
Tax Act of 2007 (Public Law 110-28) provides that a "qualified joint
venture," whose only members are a husband and wife filing a joint return,
can elect not to be treated as a partnership for Federal tax purposes.
Generally, you are self-employed if you carry on
a trade or business as a sole proprietor or an independent contractor. You
are also self-employed is you are member of a partnership that carries on a
trade or business. Most self employed individuals are in business for
themselves such as when they own a retail establishment. Additionally, as a self-employed individual, generally you
are required to file an annual tax return and to pay estimated taxes
quarterly. Self employed individuals must pay self-employment tax as well as
the normal income tax. Before you can determine if you are subject to
self-employment tax and income tax, you must figure your net
profit or net loss from your business. You have to file an income tax return if your net
earnings from self-employment were $400 or more.
Most self-employed individuals
must pay estimated taxes. Form 1040-ES, Estimated Tax for Individuals, is
used to figure estimated taxes. Form 1040-ES contains a worksheet that is
similar to Form 1040.In
order to fill out Form 1040-ES correctly you should have your prior year's
annual tax return. Form 1040-ES also contains blank vouchers you can
use when you mail your estimated tax payments or you may
