How To File Self Employed Taxes

Most self employed people have sole proprietorships, a way to tell if you are not sure is to ask yourself these questions. Do I use someone elses labor or service to run my business?

Do others see you as a employee, corporation or limited liabilities. If not then you are a sole proprietor. Most self employed people use the Schedule C form if your expenses are $2500 or less and zero inventory. Make sure you use your social security number as well as your Federal Id number.

On the form, they will ask you for a business code. This code will best describe your business. If you have a Keogh plan then you have to account for that too. Put in the name of your business if you have one. Then the form whether online filing or your tax papers will ask you what your accounting practices are . There are accrual and hybrid ( two different methods used ).

Then the form will ask you if have been materially active in your business which basically means an active role. Check off the box if you started or purchased your business in the current tax year. This question is not asked on a schedule C-EZ. Some other tips that may be helpful, if you own a property is not considered a sole proprietorship and you will have to use the Schedule E form instead.

When you are filing these self employment taxes you have to determine your gross income. On line 1 write in the dollar amount of gross receipts, this is the amount of money that has been paid to you for your work. The if you have any sales costs of good then the amount goes in line 2. Then on line 4 write in the amount of cost of goods that you sold. You also have to write in any other income you have received on line 6.

Deductible expenses

You also have to figure out the total amount of expenses. If you have over $2500 in expenses you have to use Schedule E. If you use your car for your business you must fill out part 4. Then multiply the number of business miles you have driven over the years by 44.5 cents a mile. Add any parking expenses too you can get a deduction for gas mileage. Every little bit helps. The key is to be honest and keep records in case of an audit.