To report your income to the IRS, you’ll use a Schedule C, or a simpler version of the Schedule C-EZ. You also claim expenses on this form. Any net earnings greater than $400 require the filing of a Schedule SE to calculate self-employment tax.
When filing your return, ensure you have appropriate documentation to back up all your income and expenses.
Some deductions you may qualify for:
Home office expenses.
Transportation and travel — both locally and away from your home.
Business, professional and education licenses, and fees.
In order to claim business expenses, each expense must be considered ordinary and necessary, meaning it is common to the profession and develops or maintains your business.
Current expenses are those which benefit your business for less than a year.
Expenses must be a reasonable amount to be deducted and shouldn’t be inflated.
Net profit relates to the amount you were paid for goods and services, after you’ve taken all your eligible business deductions.