Posts Tagged ‘self employed’

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Important Information for All Small Business Owners and the Self Employed

Tuesday, March 20th, 2012

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.

One of the most often asked questions by either new or existing business owners is “What records am I required to keep?” or “How long should I keep all of these business records?”  The Internal Revenue Service provides some excellence guidance for these requirements.  Additionally, these same requirements are applicable for your accounting and financial record keeping.   

Here are the links to answer each of the questions:

1.  Why should I keep business records?  http://www.irs.gov/businesses/small/article/0,,id=98557,00.html 

2.  I am planning to start my own business.  What business records should I have and keep?   http://www.irs.gov/pub/irs-pdf/p583.pdf

3.  How long should I store and retainmy business records?  http://www.irs.gov/businesses/small/article/0,,id=98513,00.html

4.   What types and kinds of records should I have, and retain?  http://www.irs.gov/businesses/small/article/0,,id=98551,00.html

5.  All of my business records will be in electronic format.  Will the IRS accepts these records or will I have to always provide them with paper documents?  http://www.irs.gov/businesses/small/article/0,,id=229050,00.html

There is also some valuable additional information on this subject: (more…)

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Important Information For The Self-Employed

Wednesday, January 25th, 2012

The exclusive purpose for the information which is provided from this website is to disseminate  information, and not to provide tax advice.


Tax Tips for the Self-employed 

There are many benefits that come from being your own boss. If you work for yourself, as an independent contractor, or you carry on a trade or business as a sole proprietor, you are generally considered to be self-employed.

Here are six key points the IRS would like you to know about self-employment and self- employment taxes:

1.  Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.

2.   If you are self-employed you generally have to pay self-employment tax as well as income tax. Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. You figure self-employment tax using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.

3.   You file an IRS Schedule C, Profit or Loss from Business, or C-EZ, Net Profit from Business, with your Form 1040.

4.   If you are self-employed you may have to make estimated tax payments.  This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you fail to make quarterly payments you may be penalized for underpayment at the end of the tax year.

5.   You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.

6.   To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

For more information see the Self-employment Tax Center, IRS Publication 334, Tax Guide for Small Business, IRS Publication 535, Business Expenses and Publication 505, Tax Withholding and Estimated Tax, available at www.irs.gov  or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

Links:

 

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Health Insurance Tax Benefits for the Self Employed, Partnerships, & Sub S Corporations

Tuesday, March 15th, 2011

Here is some information from the IRS about a special tax deduction for the self-employed. You may be able to deduct premiums paid for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents if you are one of the following:

  • A self-employed individual with a net profit reported on Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming.
  • A partner with net earnings from self-employment reported on Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., box 14, code A.
  • A shareholder owning more than 2% of the outstanding stock of an S corporation with wages from the corporation reported on Form W-2, Wage and Tax Statement.

The insurance plan must be established under your business.

  • For self-employed individuals filing a Schedule C, C-EZ, or F, the policy can be either in the name of the business or in the name of the individual.
  • For partners, the policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or your partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.
  • For more-than-2% shareholders, the policy can be either in the name of the S corporation or in the name of the shareholder. You can either pay the premiums yourself or your S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you and report the premium amounts on Form W-2 as wages to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.

For more information see IRS Publication 535, Business Expenses, available at http://www.IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

IRS Publication 535, Business Expenses (PDF)

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