If you work as a sole proprietor of your own business, it's important to plan ahead to make sure your taxes are paid and your business income and expenses are reported correctly. These Q&As may help answer questions you have about tax treatment of your business.
If you operate a business and you are not an employee, you are generally self-employed. You can be self-employed in addition to your regular job as an employee.
Probably. If you own a small business, you are generally self-employed unless you have formed a corporation. You may be called a sole proprietor, a partner in a partnership, an independent contractor, or a consultant.
If you form a corporation, and the corporation pays you as an employee, you are not self-employed for tax purposes.
When you are self-employed, you pay Social Security and Medicare tax as self-employment tax. Unlike wage earners who pay half of Social Security and Medicare tax themselves and their employers pay the other half, self-employed persons pay the entire tax themselves.
You should report all earnings generated from your business as self-employment income, including revenue from customers, clients, and organizations. To calculate your net self-employment income, TaxAct reduces these earnings by your allowable expenses.
You can deduct ordinary and necessary expenses for your business. This includes but is not limited to:
If you have any income that is not subject to withholding, including self-employment income, you may need to send tax payments to the IRS four times a year to avoid owing interest and penalties when you file your return. These payments are called quarterly estimated tax payments.
You generally must make estimated tax payments if you expect your tax liability to exceed you're the tax withheld from your pay by $1,000 or more.
You may not have to make estimated tax payments if you have enough tax withheld from your job to cover taxes on all your income, including your self-employment income. You can even increase the amount you have withheld from your paycheck so it covers income from both sources.
Make sure you have enough total tax withheld and paid in estimated taxes to avoid a large tax bill when you file.
Estimated tax payments should cover both self-employment tax and income tax. Otherwise, you may owe a large tax bill, and potentially interest and penalties, at the end of the year.
If you are a sole proprietor, TaxAct reports your business income and expenses on Schedule C, Profit or Loss From Business.
TaxAct then reports all self-employment income on Schedule SE, Self-Employment Tax. If you file a joint return and you and your spouse both have self-employment income, TaxAct reports each spouse's self-employment income on his or her own Schedule SE.
September 5 — Everyone
Federal Holiday (Labor Day) Details
September 10 — Employees who work for tips
If you received $20 or more in tips during August, report them to your employer Details
September 15 — Individuals
Make a payment of your 2018 estimated tax if you are not paying your income tax for the year through withholding (or will not pay in enough tax that way). Use Form 1040-ES. This is the third installment Details
September 15 — S Corporations
File a 2017 calendar year income tax return (Form 1120S) and pay any tax due. This due date applies only if you timely requested an automatic 6-month extension Details
September 15 — Partnerships
File a 2017 calendar year return (Form 1065). This due date applies only if you were given an additional 5-month extension Details
September 15 — Corporations
Deposit the third installment of estimated income tax for 2017 Details
September 15 — Social security, Medicare, and withheld income tax
If the monthly deposit rule applies, deposit the tax for payments in August.