What IRS Form Do I Use If Self Employed?
Self-employment and sole proprietorship are synonymous if you operate a business alone. A partnership has two or more persons who own the business. A sole proprietorship may have many employees, but only one person owns the business. The person in charge is also responsible for filing appropriate forms with the Internal Revenue Service.
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Significance
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The Internal Revenue Service has a form for everything. In fact, it has more than one form for self-employment. You will need Form 1040 as an individual taxpayer and Schedule C for your business. This form is for profit or loss for a business. You also need Schedule SE to pay self-employment taxes. That covers the basics, but there are other forms you may need. Other forms required include those for depositing quarterly or yearly taxes with the IRS.
Considerations
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If you are a self-employed person, file a Form 1040 tax return as usual, but before beginning with Form 1040, you must complete Schedule C for the business. The Schedule C starts with a gross income figure, from which you deduct your expenses. Gather these expenses incurred during the year by saving receipts and reviewing your checking account and credit card bills. You may claim utilities, advertising, equipment purchases and office expenses. Deduct these items from the gross income to arrive at net income for your business.
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Application
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The net income figure from Schedule C is transferred to Line 12 of Form 1040 and added as a part of your gross income. Complete Schedule SE for self-employment taxes by placing the net income figure into that form and performing the calculations as required. Use the figure for self-employment tax from Form SE in two locations on the Form 1040 -- one is in the adjusted income area on Line 27. You may subtract half of the self-employment tax from your income. Use the whole self-employment tax figure to complete the calculations for total taxes owed on Line 56 at the end of the Form 1040.
Effects
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Your Form 1040 tax return will have additional schedules attached, or, if you do your taxes online or with a software program, the forms and programs integrate this information into the tax calculations. You may find that you need to pay quarterly tax deposits during the next year to avoid a large tax obligation on April 15. The Electronic Federal Tax Payment System may become mandatory for use by all small business taxpayers, but it is not yet mandatory in 2010.
Forms
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File estimated tax Form 1040-ES by the 15th of the month following the quarter of the year. April 15, July 15 and Octber 15 require estimated tax deposits, along with January 15 for the last quarter of the year. If you have independent contractor workers, you will need to provide Form 1099-MISC for any contractors you pay more than $600 during the year. This form is due January 31 to the contractor and February 28 to the IRS. Use Form W-2 for employees, and provide this form by January 31 to the employee.
File a quarterly Form 941 if you have employees. This form deposits Social Security and Medicare taxes as well as income taxes withheld from paychecks and is due April 30, July 31, October 30 and January 31. You may owe FUTA, or federal unemployment tax, and state unemployment taxes as well. Complete Form 940 for federal unemployment tax and Form 940-V for the payment voucher.
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