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Income Taxes for Self-Employed Business Owners and Independent Contractors

Income Taxes for Self-Employed Business Owners and Independent Contractors

Self-employed and Independent Contractor Income Tax Information

Self-employed and Independent Contractor Income Tax Information

If you are not an employee and work on your own, you will pay taxes a little differently than employees do. Employers are required to withhold federal income tax (as well as Social Security and Medicare taxes) from their employees’ pay. However, you are required to pay these taxes on your own, either through quarterly estimated tax payments or when you file your tax return at the end of the year.

If you are not an employee and work on your own, you will pay taxes a little differently than employees do. Employers are required to withhold federal income tax (as well as Social Security and Medicare taxes) from their employees’ pay. However, you are required to pay these taxes on your own, either through quarterly estimated tax payments or when you file your tax return at the end of the year.

The topics below will help you understand what you need to do to pay your taxes and file your return if you are self-employed:

The topics below will help you understand what you need to do to pay your taxes and file your return if you are self-employed:

You are required to file a tax return if your total self-employment income is a least $400

You are required to file a tax return if your total self-employment income is a least $400

Whether you are considered employed (an employee) or self-employed (business owner or independent contractor) depends on these three factors:

Whether you are considered employed (an employee) or self-employed (business owner or independent contractor) depends on these three factors:

Refer to the chart below to find out whether you’re an employee or self-employed taxpayer:

Refer to the chart below to find out whether you’re an employee or self-employed taxpayer:

Employee:

Employee:

W-2 Form(s)

W-2 Form(s)

Self Employed:

Self Employed:

Schedule K-1

Schedule K-1

Note: Files 1120 business tax return via Schedule K-1 if they have a corporation

Note: Files 1120 business tax return via Schedule K-1 if they have a corporation

Form 1040

Form 1040

Schedule C or Schedule C-EZ

Schedule C or Schedule C-EZ

Schedule SE

Schedule SE

Form 1040

Form 1040

Schedule C or Schedule C-EZ

Schedule C or Schedule C-EZ

Schedule SE

Schedule SE

You are considered self-employed if you carry on a trade or business (not just a hobby). Self-employment is divided into two types of taxpayers: business owner and independent contractor.

You are considered self-employed if you carry on a trade or business (not just a hobby). Self-employment is divided into two types of taxpayers: business owner and independent contractor.

If you control the type of work you do and the result of the work done, you are a self-employed business owner.

If you control the type of work you do and the result of the work done, you are a self-employed business owner.

You are also considered a business owner if any of the following statements are true:

You are also considered a business owner if any of the following statements are true:

Generally, you are considered an independent contractor if the person or organization that pays you has the right to direct and control only the result of the work and not what work will be done nor how it will be done.

Generally, you are considered an independent contractor if the person or organization that pays you has the right to direct and control only the result of the work and not what work will be done nor how it will be done.

Self-employed independent contractors include (but are not limited to): doctors, dentists, veterinarians, lawyers, accountants, public notaries, carpenters, electricians, plumbers, mechanics, stonemasons, home remodelers, housecleaners, lawn care providers, babysitters, newscarriers, software developers, web designers, graphic artists, entertainers, guest speakers, truckers, cab drivers, farm workers, interpreters, project managers, hairstylists, salespeople, freelance writers, etc.

Self-employed independent contractors include (but are not limited to): doctors, dentists, veterinarians, lawyers, accountants, public notaries, carpenters, electricians, plumbers, mechanics, stonemasons, home remodelers, housecleaners, lawn care providers, babysitters, newscarriers, software developers, web designers, graphic artists, entertainers, guest speakers, truckers, cab drivers, farm workers, interpreters, project managers, hairstylists, salespeople, freelance writers, etc.

Independent contractor income is compensation you receive for doing work or providing services as a self-employed individual, not as an employee. If you are self-employed and an independent contractor, your compensation is reported on Form 1099-MISC (along with rents, royalties, and other types of income). If you received a 1099-MISC efile it instead of a W-2 efile it, the payer of your income did not consider you an employee and did not withhold federal income tax or Social Security and Medicare tax. A 1099-MISC means that you are classified as an independent contractor, and independent contractors are self-employed.

Independent contractor income is compensation you receive for doing work or providing services as a self-employed individual, not as an employee. If you are self-employed and an independent contractor, your compensation is reported on Form 1099-MISC (along with rents, royalties, and other types of income). If you received a 1099-MISC efile it instead of a W-2 efile it, the payer of your income did not consider you an employee and did not withhold federal income tax or Social Security and Medicare tax. A 1099-MISC means that you are classified as an independent contractor, and independent contractors are self-employed.

A trade or business, in general terms, is an activity carried out to make a profit. Even if you don’t actually actually make a profit, you are still carrying out a trade or business as long as your motive is to make a profit and you make regular, ongoing efforts to further the interests of your business. A trade or business may be full-time or part-time, and it may be carried out in addition to regular employment.

A trade or business, in general terms, is an activity carried out to make a profit. Even if you don’t actually actually make a profit, you are still carrying out a trade or business as long as your motive is to make a profit and you make regular, ongoing efforts to further the interests of your business. A trade or business may be full-time or part-time, and it may be carried out in addition to regular employment.

A hobby is not a trade or business. If you carry on an activity that occasionally produces income, but your main purpose for pursuing the activity is not for profit, then you may be engaged in a hobby. Hobby income should be reported as “other income” on your tax return. If you itemize deductions, you can deduct hobby expenses up to the amount of your hobby income. See the tax return filing requirements to find out if your hobby income requires you to file a tax return.

A hobby is not a trade or business. If you carry on an activity that occasionally produces income, but your main purpose for pursuing the activity is not for profit, then you may be engaged in a hobby. Hobby income should be reported as “other income” on your tax return. If you itemize deductions, you can deduct hobby expenses up to the amount of your hobby income. See the tax return filing requirements to find out if your hobby income requires you to file a tax return.

As a self-employed individual, you are responsible for paying income taxes and self-employment taxes.

As a self-employed individual, you are responsible for paying income taxes and self-employment taxes.

Self-employment taxes are paid in addition to regular income taxes. Self-employment tax is made up of Social Security and Medicare taxes.

Self-employment taxes are paid in addition to regular income taxes. Self-employment tax is made up of Social Security and Medicare taxes.

When you prepare your return on efile.com, you will be asked if you own a business or have received a Form 1099-MISC efile it, or a Schedule K-1 efile it. Based on the answers you provide, efile.com will help you report your business income and expenses by providing the forms that you will need and asking for the information that needs to be reported on each form.

When you prepare your return on efile.com, you will be asked if you own a business or have received a Form 1099-MISC efile it, or a Schedule K-1 efile it. Based on the answers you provide, efile.com will help you report your business income and expenses by providing the forms that you will need and asking for the information that needs to be reported on each form.

A Schedule SE efile it is used to calculate your self-employment tax. We will generate the Schedule SE for you. You can also adjust any of the amounts on your Schedule SE that are automatically calculated if this is necessary.

A Schedule SE efile it is used to calculate your self-employment tax. We will generate the Schedule SE for you. You can also adjust any of the amounts on your Schedule SE that are automatically calculated if this is necessary.

If you are self-employed, and you expect to owe $1,000 or more in tax when you file your return, then the IRS requires you to make quarterly estimated tax payments. Estimated tax payments are used to pay income tax and self-employment tax. If you do not pay enough tax through withholding and/or estimated tax payments to cover your tax liability, then you will be charged a small penalty by the IRS. The tax penalty is calculated on your tax return, and added to the amount you owe (or subtracted from your refund).

If you are self-employed, and you expect to owe $1,000 or more in tax when you file your return, then the IRS requires you to make quarterly estimated tax payments. Estimated tax payments are used to pay income tax and self-employment tax. If you do not pay enough tax through withholding and/or estimated tax payments to cover your tax liability, then you will be charged a small penalty by the IRS. The tax penalty is calculated on your tax return, and added to the amount you owe (or subtracted from your refund).

You calculate and make estimated tax payments using Form 1040-ES efile it, which is really a booklet than a form. Use the included worksheet to figure the amount of your estimated tax payments. You don’t have to send this worksheet to the IRS, but they recommend that you keep it for your records.

You calculate and make estimated tax payments using Form 1040-ES efile it, which is really a booklet than a form. Use the included worksheet to figure the amount of your estimated tax payments. You don’t have to send this worksheet to the IRS, but they recommend that you keep it for your records.

The booklet also contains four payment vouchers, which you can use to make your quarterly payments, if you are paying by check or money order. Just fill out the appropriate voucher and enclose it in the envelope with your check or money order made out to “United States Treasury”. You can find the correct mailing address to use on the “Where to File…” chart included in the 1040-ES booklet.

The booklet also contains four payment vouchers, which you can use to make your quarterly payments, if you are paying by check or money order. Just fill out the appropriate voucher and enclose it in the envelope with your check or money order made out to “United States Treasury”. You can find the correct mailing address to use on the “Where to File…” chart included in the 1040-ES booklet.

Alternatively, you can make your estimated tax payments electronically online. You can pay online using a credit card, debit card, or electronic funds withdrawal. If you make your payments online, you do not have to mail vouchers to the IRS. To pay online, go to www.irs.gov/epay.

Alternatively, you can make your estimated tax payments electronically online. You can pay online using a credit card, debit card, or electronic funds withdrawal. If you make your payments online, you do not have to mail vouchers to the IRS. To pay online, go to www.irs.gov/epay.

You may have to pay estimated income tax four times throughout the year (quarterly) because you do not have taxes withheld from your pay by an employer. The quarterly tax payment periods for Tax Year 2017 are in the chart below:

You may have to pay estimated income tax four times throughout the year (quarterly) because you do not have taxes withheld from your pay by an employer. The quarterly tax payment periods for Tax Year 2017 are in the chart below:

If you are making an estimated tax payment by mail, your payment will be considered on time if it is postmarked on the due date. If the due date falls on a Saturday, Sunday, or legal holiday, you will be on time if your payment is made on the next business day.

If you are making an estimated tax payment by mail, your payment will be considered on time if it is postmarked on the due date. If the due date falls on a Saturday, Sunday, or legal holiday, you will be on time if your payment is made on the next business day.

Yes, if you want to or need to make the additional payments. Just make a copy of a payment voucher or pay online. However, make sure that you pay enough by each due date to cover the preceding payment period.

Yes, if you want to or need to make the additional payments. Just make a copy of a payment voucher or pay online. However, make sure that you pay enough by each due date to cover the preceding payment period.

Research & References of Income Taxes for Self-Employed Business Owners and Independent Contractors|A&C Accounting And Tax Services
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