Individuals, like freelancers or independent contractors, must be mindful of certain self-employment tax forms they need to file before the Internal Revenue Service (IRS). Accomplishing and submitting tax returns for the self-employed may become very complicated, especially for those who are operating businesses in their own homes. What are the tax forms a self-employed individual have to keep in mind?
Self-Employment Tax Forms: A Handy List
1. Form 8829, Expenses for Business Use of Your Home
Since we’re discussing tax forms for home business owners, it must be established that filling out Form 8829 is a must. This form acts as the main IRS form for declaring allowable business-related house expenses in a year. If a freelancer or independent contractor uses multiple homes for official business, one form shall be filed for each.
According to the IRS, one can declare expenses under “home business” if spent:
- in areas of the house considered as primary business location;
- in areas of the house, where owners meet their clients or customers for business purposes; or
- in a location not attached to the house but used for business purposes.
2. Schedule C (Form 1040), Profit or Loss From Business
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A self-employed, sole proprietor has to declare in Schedule C of Form 1040 any income gain or loss from work. This form shall be attached to either Forms 1040, 1040NR or 1041. Information reported on this form includes:
- any income and deductions from joint ventures; and
- any income declared on Form 1099-MISC (Miscellaneous Income)
3. Schedule C-EZ (Form 1040), Net Profit from Business
For some self-employed home business owners, they need to accomplish Schedule C-EZ instead of Schedule C. According to the IRS, home business owners have to file Schedule C-EZ if they have:
- Spent $5,000 or less for business,
- No inventory, net loss, or employee in an entire year,
- No tax deduction for home business-related expenses,
- Not filed Form 4562 (Depreciation and Amortization)
4. Schedule SE (Form 1040), Self-Employment Tax
Schedule SE serves as the basic IRS form that determines the tax self-employed individuals have to pay. Those who earn $400 or more from self-employment have to pay self-employment tax to the government. This form also becomes the basis of the Social Security Administration in calculating social security taxes. For 2017, the IRS sets the highest self-employment amount of income for social security tax to $127,200.
5. Form 1099-MISC, Miscellaneous Income
Understanding the 1099-MISC Tax Form#TaxesAccountinghttps://t.co/HVElW4Bn1L
For many, becoming self-employed requires entering new territory, especially when it comes to taxes. If you’re a freelancer or contract w… pic.twitter.com/LSxJ5CmQyL
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According to the IRS, those who need to file Form 1099-MISC include self-employed individuals, who receive no lower than:
- $10 worth of dividends, royalties, or tax-exempt interest;
- $600 worth of rents, prizes, and other income payments.
6. Schedule K-1 (Form 1065), Partner’s Share of Income, Credits, Deductions, etc.
Individuals involved in a partnership are considered self-employed when they perform services specifically for the said partnership. Hence, they need to file Schedule K-1. This rule also covers members of a limited liability company (LLC).
7. Form 1040, U.S. Individual Income Tax Return
Yes, even home business owners must duly fill out Form 1040. You must file this form if your net earnings from self-employment reach $400 and above. And even if you earn less than $400, you still need to check the instructions in Form 1040 and see if you fall into any of the filing requirements.
Now you know the basic self-employment tax forms required of home business owners, watch this video from Expertvillage and learn more tax tips for home business owners:
Home business owners need to understand what these self-employment tax forms are, so they won’t get confused with filing their taxes. Also, it’s important for the self-employed to be aware of these forms, so they can properly apply for the appropriate tax credits, deductions, and benefits.
Do you have any issues related to filing these self-employment tax forms? Share us your thoughts in the comments section below.