Six Tax Tips for the Self-Employed | Business
Self-employed taxpayers normally earn income by carrying on a trade or business. Here are six important tips from the IRS for the self-employed:
- Self-Employed Taxpayers. Sole proprietors and independent contractors are two types of self-employment. Taxes can be complex for the self-employed. Check out the IRS Self Employed Individuals Tax Center.
- Estimated Tax. Self-employed taxpayers generally need to make quarterly estimated tax payments. IRS Publication 505, Tax Withholding and Estimated Tax, has details on making those payments.
- Schedule C or C-EZ. Self-employed taxpayers must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with their Form 1040. For expenses less than $5,000, use Schedule C-EZ. Each form’s instructions provide the rules for which form to use.
- SE Tax. For those making a profit, self-employment and income tax may need to be paid. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax.
- Allowable Deductions. Taxpayers can deduct expenses paid to run a business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in the industry. A necessary expense is one that is helpful and proper for a trade or business.
- When to Deduct. In most cases, taxpayers can deduct expenses in the year paid or incurred. Some costs must be ‘capitalized,’ however. This means deducting the cost over a number of years.
This information is not intended to be a substitute for specific, individualized tax advice as individual situations will vary. Royal Alliance Associates, Inc., Georgetown Capital and its advisors are not engaged in rendering tax advice.
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Prepared by the IRS. For more information go to www.irs.gov.
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Joseph V. Curatolo, President of Georgetown Capital Group
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