Self-employed taxpayers are those who freelance, own their own business, or work on contract. Self-employed individuals have certain tax requirements that they must meet. If you are self-employed, you should be aware of these requirements when you file your federal income tax return. The IRS offers six different pieces of advice about how to correctly file self-employment income.
- Now what income is considered self-employment income. If you receive payment for side jobs or part time work that is contacted, you may have self-employment income. This income can be supplemental to your regular salary as an employee of another business.
- Self-employed taxpayers have to file a schedule C or C-EZ along with a form 1040. A schedule C-EZ is available provided expenses are less than $5000 and other criteria is met.
- You have to pay self-employment tax along with income tax. You can use the schedule FE, Self-Employment Tax to determine how much you owe and file it with your form 1040. Self-Employment tax covers your portion of Social Security and Medicare taxes.
- You may have to pay estimated taxes throughout the year in quarterly installments. You can owe a penalty if you haven’t paid enough in taxes.
- If you have business expenses, you may be able to deduct them provided they meet the standard of being ordinary and necessary. Expenses have to be common and accepted in the industry in which you work.
- In most cases, expenses are deducted in the same year in which they were incurred, however some expenses can be capitalized on, which extends the deduction on number of tax years.