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| Tax School Homepage |
| To file your annual business tax return, you will need to use Schedule C or the easier version Schedule C-EZ to report your income or loss from a business your operated or a profession you practiced as a sole proprietor. Will also need to complete Schedule SE if you make a profit and to pay your self-employment taxes. Small businesses and statutory employees with expenses of $5,000 or less may be able to file Schedule C-EZ instead of its more complicated counterpart Schedule C. In order to report your Social Security and Medicare taxes, you must file Schedule SE. You will need to the income or loss calculated on Schedule C or Schedule C-EZ to calculate the amount that needs to be paid for the year. If you made or received a payment as a small business or self-employed individual, you are most likely required to file an information report with the IRS. |
| When beginning your business, you must decide what form of business entity to establish because your form of business determines which reports you must file. Sole proprietorships, partnerships and corporations have been around forever. The S corporation business structure has been around for a while also. However, the Limited Liability Company (LLC) is a fairly new structure allowed by state stature. If you use part of your home for business, you may be able to deduct expenses for the business use of your home and this deduction is available for any person who uses part of their home to perform their self employment duties. |
| A small business whose only owners are a husband and wife filing a joint return, can elect not to be treated as a partnership. Thus the husband and wife can file their business taxes directly on Schedule C as sole proprietors. |
| Independent Contractor |
| All evidence of the degree of control and independence in the worker and business relationship should be considered. These facts fall into the category of behavioral and financial control. Additionally, the evidence of the degree of control and independence in worker and business or employer relationship is seen in the relationship of the parties involved. |
| In examining the relationship between the worker and the business, the financial control fact shows whether the business has a right to direct or control the financial and business aspects of the worker's job. Moreover, in examining the relationship between the worker and the business, the relationship of the parties shows the type of relationship the parties had. Furthermore, financial control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker's job such as the extent to which the worker has unreimbursed business expenses. Also, this fact covers the extent of the worker's investment in the facilities or tools used in performing services. In addition, this fact covers the extent to which the worker makes his or her services available to the relevant market and how the business pays the worker. |
| Relationship of the parties covers facts that show the type of relationship the parties had such as any written contracts describing the relationship the parties intent to create. This fact also covers the employee-type benefits if any provided by the business such as insurance, pension plans, vacation or sick pay. Also, The relationship fact covers the permanency of the relationship, and the extent to which the services performed by the workers are taken as a key aspect of the regular business of the employer. |
| Social Security Benefits |
| The Federal Contributions Act (FICA) tax includes the social security tax and Medicare tax. Hence, your income and filing status affect whether you must pay taxes on your social security. Consequently, if your total income is more than the base amount for your filing status, then some of your benefits may be taxable. Now when social security is your only source of income, then this is a different story since your social security benefits may not be taxable and you may not even need to file a federal income tax return. |
| To illustrate further, if you received Social Security benefits and other income, your benefits will not be taxable unless your MAGI is more than the base amount for your filing status. Another thing, if you and your child both received benefits, but the check for your child was made out in your name, you must use only your own portion of the social security benefits in figuring if any part is taxable to you. |
| If you are married and file a joint return, you and your spouse must combine your incomes and social security benefits when figuring the taxable portion of your benefits. Additionally, even if your spouse did not receive any benefits, you must add your spouse's income to yours when figuring the taxable part if filing a joint return. |
| Copyright © 2014 [Hera's Income Tax School]. All Annual Filing Season Program rights reserved. |
| Revised: 12/14/14 |
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