When filing taxes, it is very important to determine if you have self-employment income because it is treated in a special way on a tax return.First, it is important to clarify the line between self-employment, hobbies, and wage income. This is essential with the IRS to avoid penalties or major problems. Here are a few answers:
What is considered self-employment?
- Trade or Business. Sole proprietor or member of company. Basically, any activity with the primary purpose to obtain profit.
- Regular work and part-time business. Business income is considered self-employment income.
- Self-employment tax is subject to self-employment: Social Security and Medicare Payments
When a taxpayer is considered an independent contractor?
- Performs services for others. The person hiring does not operate or control it means or methods.
- The person hiring only control the results.
- They work on their own.
- Person who is on contract and no employer withholds taxes
- Income subject to tax Self employment
- You may receive a 1099 Misc. Miscellaneous Income
Could be considered my hobby a business?
- Primary purpose is to earn income or profit.
- Usually a hobby is not considered a business.
Why as a contractor often has a debt to the IRS when you file taxes?
- An average of 15% is intended to tax.
- Self-employment no deductions: Tax Federal, State, Social Security and Medicare .
Need help have a record of expenses and mileage at the time of filing taxes as an independent contractor?
- If all deductible business expenses: advertising, legal fees, office expenses, repairs, etc materials.
- If the taxpayer uses your car or truck for business purposes the standard mileage rate can be used.
- You must maintain a record of miles for each activity.
- The IRS could request to review this information on audit.
How could I keep records of my work to file my taxes?
It is important that taxpayers who are self-employed may have a record of all income and expenses that have had during the year. Just have to write down all this information in a notebook. It is important to observe all invoices related to the cost of their work.
What records must have the taxpayer is self-employed?
- Records showing the source of income and deductible expenses
- Bank deposits, receipt books, invoices, canceled checks and / or reports of credit card
- IRS may request these records on audit.
Who must file a tax return when you have your own business?
- Taxpayer must file a tax return if your net earnings from self-employed business are $ 400 or more.
- Income less than $ 400 may be required if the form is received 1099 – MISC.
If a business goes bankrupt must file a tax return?
Although the business is no longer in operation, the owner remains responsible for filing the tax return for the business on the corresponding dates. If you had employees, you must file all payroll that apply.