6 Tax Tips for Self-Employed Persons

6 Tax Tips for Self-Employed Persons

The IRS recently posted an article about this topic.  Just in case you missed it, we’ve summarized the highlights here for you and included the appropriate links to the IRS website.  

Are you a Self-Employed Person?

Self-employed persons are taxpayers that work for themselves as a freelancer or the owner of a business - rather than for an employer. For you, the IRS has provided six important tips.

1. Self-Employed Taxpayers 

Sole Proprietors & Independent Contractors are two popular types of self-employment. Since taxes may be complex for the those that are self-employed, the IRS has provided a link here to assist you with your taxes:Self Employed Individuals Tax Center.

2. Estimated Tax 

As a Self-employed taxpayers, it is recommended by the IRS to makeQuarterly Estimated Tax Payments. The IRS has this link, Publication 505, with important information for you about Tax Withholding & Estimated Tax along with details on making those payments.

3. Schedule C or C-EZ
The IRS states that self-employed taxpayers must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with their Form 1040. Please note that for expenses less than $5,000, use Schedule C-EZ. Each form’s instructions provide the rules for which form to use.

4. SE Tax
For those making a profit, self-employment and income tax may need to be paid. Self-employment tax includes Social Security and Medicare taxes. The IRS advised self-employed taxpayers to use Schedule SE, Self-Employment Tax, to figure the tax.

5. Allowable Deductions
The IRS allows that taxpayers may deduct expenses paid to run a business that are both ordinary and necessary. Ordinary expenses are expenses that are common and accepted in the industry. Necessary expenses are helpful and proper for a trade or business.

6. When to Deduct
In most cases, taxpayers may deduct expenses in the year paid or incurred. Please note that some costs must be ‘capitalized’ which  means deducting the cost over a number of years.

Do you require assistance with your small business taxes and personal taxes?  FL-Accounting and Advisers – your Boutique Accounting Company – is here to provide you with a complimentary consultation to discuss your specific needs. Contact our office at (561) 939-2553 for your appointment. After-hours appointments are available as well as Accounting services in English and Spanish.

Wendy Ettorre