With the most recent business trend favoring remote work and self-employment, many are wondering how to file their taxes now that they’re working for themselves or working on their time.
Filing taxes for those that work for themselves is much different than how an employee would file their taxes. If you’ve recently become self-employed, you want to know how to file your taxes now that you’re working for yourself.
In this article, we’ll go over the high level details of what you want to know if you want to file your taxes as a self-employed entrepreneur.
Filing Taxes for Self-Employed Entrepreneurs
If your net profit is greater than $400, you must pay self-employment (SE) taxes. You’ll want to report your earnings on Form 1040. You will also need to include forms Schedule 1 and Schedule C with your tax return. These are the required forms when you are self-employed.
For those that are self-employed, they’ll be responsible for paying for Social Security and Medicare taxes.
If you and your spouse are in business together, the IRS has special rules for you. You can elect to file separate Schedule documents and get treated as a qualified joint venture, dividing income and expenses.
What is my tax ID number for my business?
Your personal tax Id is your SSN. Your business can have a unique employer identification number (EIN). If you don’t own have employees and your state doesn’t require a separate number, you can use your SSN for your self-employment income.
If you have employees or are otherwise required to, you must complete an online Form SS-4 (the EIN application) with the IRS to get an EIN.
What can I claim on my deductions?
If you’re self-employed, you’re responsible for supporting yourself and defining the parameters of your employment needs. You want to make sure the expenses you claim are valid business expenses and work towards supporting your operation.
Some items that can be considered as a business expense include:
- Vehicle for business and related expenes, including gas, oil, insurance, repairs, cleaning, and registration. You’ll need to keep track of your car’s mileage throughout the year to ensure the accuracy of your deductions.
- Employee wages and salaries that are paid during the tax year for work directly related to your business.
- Advertising expenses
- Office supplies
- Banking fees
- Legal fees associate with your business
- Professional fees like bookkeeping and accounting
- Cleaning and maintenance
- Membership dues, like business associations and trade groups
- Publications and books on the business
- Storage
- Other common business expenses
More Information
Are you self-employed? Here are common businesses that fall under self-employment:
- Work as an independent contractor
- Are the sole proprietor of a business
- Practice a trade as your business
- Work a side gig that is based on your time and you provide the necessary tools to do the work
- Are, in one way, a business for yourself
- Receive a Form 1099-MISC or 1099-K instead of a W-2
