make your payments using
the Electronic Federal Tax Payment System (EFTPS). If this is your first year being self-employed you will
need to estimate the amount of income you expect to earn for the year. Also,
if you estimated your earnings too high, simply complete another Form
1040-ES worksheet to refigure your estimated tax for the next quarter. Likewise,
if you estimated your earnings too low, simply complete another Form
1040-ES worksheet to recalculate your estimated taxes for the next quarter.
To file your annual business tax return, you will
need to use Schedule C or the easier version Schedule C-EZ to report your income or loss from a
business your operated or a profession you practiced as a sole
proprietor. Will also need to complete Schedule SE if you make a
profit and to pay your self-employment taxes. Small businesses and statutory employees with
expenses of $5,000 or less may be able to file Schedule C-EZ instead
of its more complicated counterpart Schedule C. In order to report your Social Security and
Medicare taxes, you must file Schedule SE. You will need to the
income or loss calculated on Schedule C or Schedule C-EZ to calculate the
amount that needs to be paid for 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 report with the IRS.
When beginning your business, you must decide
what form of business entity to establish because your form of business
determines which reports you must file. Sole proprietorships, partnerships
and corporations have been around forever. The S corporation business
structure has been around for a while also. However, the Limited Liability
Company (LLC) is a fairly new structure
allowed by state stature. If you use part of your home for business, you
may be able to deduct expenses for the business use of your home
and this deduction is available for any person who uses part of
their home to perform their self employment duties.
A small business whose only owners are a husband
and wife filing a joint return, can elect not to be treated as a partnership.
Thus the husband and wife can file their business taxes directly on Schedule
C as sole proprietors.
Independent Contractor
People such as doctors, dentists, veterinarians,
lawyers, accountants, contractors, subcontractors, public stenographers, or
auctioneers who are in an independent trade, business, or profession in
which they offer their services to the general public are generally
independent contractors. However, whether these people are independent
contractors or employees depends on the facts in each case. The general rule
is that an individual is an independent contractor if the payer has the
right to control or direct only the result of the work and not what will be
done and how it will be done. The earnings of a person who is working as an
independent contractor are subject to Self-Employment Tax.If you are an independent
contractor, you are self-employed.
You are not an independent contractor if you
perform services that can be controlled by an employer
such what will be done and how it will be
done. This applies even if you are given freedom of action. What matters is
that the employer has the legal right to control the details of how the
services are performed.If an
employer-employee relationship exists regardless of what the relationship is
called, you are not an independent contractor and your earnings are
generally not subject to Self-Employment Tax.
