How Is Income Tax Reported if I am a Self-Employed Worker?If you are self-employed, you are taxed on the income you've earned. You also make business deductions on a Schedule C report. As a self-employed individual depending on the nature of your business, you can report either on a cash basis or an accrual method: - Cash basis means you deduct all expenses and report income as the cash is received
- Accrual Method means you report income that has been earned, whether or not received
What Kind of Expenses Can I Deduct from my Income Tax Report?
You report certain business expenses on Schedule C (or Schedule C-EZ if you have business expenses of $2,500 or less). These "expenses" include car expenses, health insurance expenses, interest paid on business debts, rent on business property, real estate and personal property taxes, certain travel/meals/entertainment expenses, utilities, wages paid to family members who work for you, and professional expenses. How Do I Calculate My Self-Employment Income Tax?Self employment income is your net profit from your business or profession, whether you participate full or part time. Self Employment taxes are calculated on Schedule SE, which you are required to file if you earn more than $400 in self-employment income. As of 2004, the self-employment tax rate is 15.3 percent. Self-employment taxes of 15.3 percent apply to earnings under $87,000. Self-Employment taxes apply to .9235 percent of your net income. Also, after you have figured self-employment taxes, you can then deduct 50 percent. Are Health Insurance Premiums for Self-Employed Individuals Deductible?
Health insurance premiums for self-employed individuals are 100 percent deductible. Should I Contact an Attorney?If you have any questions regarding self-employment tax issues it is wise to contact an attorney. An attorney can advise you on the complicated tax system as well as assist you in filing out the correct forms. |
