If you are someone who is considered self-employed, there are some things that you need to keep in mind about your federal tax return. Today, we will discuss 6 essential tips that you need to know about your self-employed income.
1. Self-employment income can include money paid for part time work. If it is not your regular job or you are not having taxes taken out of the funds before you receive it, it is self-employment income.
2. You have to file a Schedule C or Schedule C-EZ when you file your Form 1040.
3. If you profited from your self-employment income you will have to pay income tax in addition to self-employment tax. Self-employment tax covers social security and Medicare tax. To receive an estimate, of the amount, use Schedule SE.
4. You may have to make estimated tax payments throughout the year. These payments are made on self-employment income. If you do not pay enough taxes during the year, you will receive a penalty.
5. Some of your business expenses are deductible. Most expenses can be deducted in full while a small portion has to be capitalized. Capitalized means you can deduct a fraction of the expense over a certain amount of years.
6. Business costs can only be deducted if they are ordinary and necessary. Ordinary expenses are common and well known in your industry. Necessary expenses are helpful for your business.
We recommend that self-employed taxpayers file their taxes through TurboTax. By filing with Turbo Tax, you are guaranteed to pay the least amount of money in taxes. They make sure that they show you all credits and deductions that you qualify for.
Using Turbo Tax is very easy too. They ask you simple and relevant questions about your unique tax situation and place the information you give them on the relevant forms in the correct locations. You can even get a discount coupon.