If you are self-employed, you are still required to pay self-employment taxes to the IRS. The main tax forms you will need to include when filing your 1040 include forms are Schedule C and Schedule SE. Let’s look a little deeper into what exactly each of these forms will do.
Any self-employed individual who has made $400 or greater during the calendar year will need to include a Schedule SE when filing taxes. This form figures the tax due on your net earnings for the year. When you are employed by someone, they typically withhold Social Security and Medicare taxes from your paycheck for you but when you are an independent contractor of any kind, working for yourself, you’ll need to use a Schedule SE to pay this for yourself. This is 12.4% for Social Security tax and 2.9% for Medicare tax. The good news is you can deduct 1/2 of your self-employment tax when filing your tax return.
Use Schedule C to report any income or loss from your business. This form helps you figure out what profit or losses you’ve had during the year. Here you will also be able to figure out your deductions. Fortunately, self-employed individuals can earn back some of their income received by deducting expenses used to run your business. The main things you can write are:
- Vehicle usage
- Advertising expenses and marketing costs
- Office supplies
- Rent paid for office space or equipment
- Minor repairs and maintenance
- Membership dues for any small business associations or trade groups you belong to
- Costs incurred when setting up your business and acquiring your license
- Any legal fees associated with your business
Working for yourself can be very rewarding and comes with a lot of perks. But come tax time, it can get quite confusing. By taking advantage of these tax breaks that are available you can earn back some additional money.
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