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.
Self-employed individuals file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with their Form 1040.
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.
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.
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.
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.
I hope you find this video clip helpful, please check out our other videos for answers to your various questions.
This article contains general information for taxpayers and should not be relied upon as the only source of authority. Taxpayers should seek professional tax advice for more information or contact Advance Tax Relief LLC
Noah Daniels, EA is the President of Advance Tax Relief LLC based in Houston, TX. Noah is very experienced in representing taxpayers before the examinations, collections and appeals divisions of the IRS and various state taxing authorities. Noah has helped hundreds of taxpayers nationwide resolve their tax problems with the IRS saving taxpayers hundreds of thousands of dollars in back-taxes, penalties and interest and the number keeps rising. He also speaks at various local organizations educating the public on how to handle their IRS tax problems, small business credits and tax compliance issues. For speaking engagements or for tax related questions email firstname.lastname@example.org.
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