Tax Tips for the Self Employed – Fresh Start Tax LLC
Tax Tips for the Self Employed – Fresh Start Tax LLC
If you are self-employed here some excellent tax tips to help you navigate through the IRS.
Tax Tips for the Self-Employed
When you are self-employed, it typically means you work for yourself, as an independent contractor, or own your own business.
Here are your main points of interest.
1. Self-employment income can include pay that you receive for part-time work you do out of your home.
This could include income you earn in addition to your regular job.
2. Self-employed individuals file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with their Form 1040.
3. If you are self-employed, you generally have to pay self-employment tax as well as income tax.
Self-employment tax includes Social Security and Medicare taxes.
You figure this tax using Schedule SE, Self-Employment Tax.
4. If you are self-employed you may have to make estimated tax payments.
People typically make estimated tax payments to pay taxes on income that is not subject to withholding.
If you do not make estimated tax payments, you may have to pay a penalty when you file your income tax return.
The underpayment of estimated tax penalty applies if you do not pay enough taxes during the year.
5. When you file your tax return, you can deduct some business expenses for the costs you paid to run your trade or business.
You can deduct most business expenses in full, but some costs must be ’capitalized.’ This means you can deduct a portion of the expense each year over a period of years.
6. You may deduct only the costs that are both ordinary and necessary.
An ordinary expense is one that is common and accepted in your industry.
A necessary expense is one that is helpful and appropriate for your trade or business.
7. Always make sure you keep copies of any and all information sent to the IRS.
Tax Tips for the Self Employed – Fresh Start Tax LLC