Tax time can be confusing if you are a self – employed. It is not difficult to file a federal tax return, and with a little information, independent contractors and small business owners can easily file returns just like the rest of the taxpayers. Understanding what is classified as self – employed income and your tax liability is key to a smooth process of filing. Follow these tips for easy implementation of taxes.
Income from self-employment includes anything you made doing part time work as well as profits from your regular job. When filing a return, you are required to include a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business with your Form 1040.
If you have profited from work or your business, you may be subject to a self-employment tax, which includes Medicare and Social Security taxes. To determine the amount of the tax you have to pay, fie Schedule SE, Self-Employment Tax, with your regular return.
You can be charged penalty fees if you haven’t paid enough taxes, so it’s critical to keep records of all deductions and payments. You may be required to make tax payments, based on income that isn’t subject to withholding, to ensure you don’t get penalized.
Any deductions must be deemed necessary, and can’t be uncommon. The expense must be typical to your industry, and required to help your business run smoothly and efficiently.