How to File Taxes as Self-Employed

Self-employed individuals are generally required to file an annual tax return and pay estimated taxes quarterly. You’ll need to carefully track your income and expenses to properly file your taxes.

This post is provided for general information only. Please confirm the details and circumstances of your unique situation with your tax accountant or other appropriate advisor before taking action.

How do you make quarterly payments?

You will usually need to pay estimated taxes quarterly. This includes your income taxes, Social Security taxes, and Medicare taxes.

You can submit your estimated tax payments on the IRS website and mark that they’re for estimated taxes. When you file your tax return in April, you’ll calculate the exact amount of tax that you owe.

If you paid too much, you’ll get a refund. If you didn’t pay enough, you’ll have to make an additional payment and may owe interest.

How do you file your annual tax return?

To file your annual tax return you will need to use Schedule C to report your income or losses from a business you operated as a sole proprietor or a profession you practiced. Schedule C is part of your Form 1040 Individual Tax Return.

You will also need to use Schedule SE to calculate the amount of Social Security and Medicare, or self-employment, taxes you should have paid.

Do you need to file any information returns?

If you hired employees, you may need to file a W-2 for them. If you made payments to contractors, you may need to issue them a Form 1099-NEC. Carefully review the requirements for these forms as there are large penalties if you don’t file them when required.

Are there tax forms for different business structures?

If you’re a sole proprietor or LLC, you’ll usually just file a Schedule C. If you’re a partnership, corporation, LLC with multiple members, or LLC taxed as a corporation, you may need to file a separate tax return based on your business type.

What tax deductions can you take?

You may be eligible for a number of deductions depending on what type of business you’re in. See Instacart Taxes for specific information about being an Instacart shopper.

Home Office Deduction

Homeowners can deduct expenses related to running a business out of their home. Renters can also deduct expenses related to running businesses out of their homes. This includes rent, utilities, telephone bills, internet service, etc.

Self Employed Health Insurance Premium

Self-employed people may be able to deduct the cost of health insurance premiums on their taxes. This includes the cost of health insurance for spouses, dependents, and young children.

For qualified long term care insurance, you must pay an additional premium for each year over 65. The amount you can deduct depends on how old you are. The maximum deduction is $5,430 per year.

Self-employed health insurance deductions will be shown on line 16 of Schedule 1 of your 1040 form.

Vehicle Expenses

Self-employed people can deduct the cost of their cars if they use them for business purposes. This includes driving to work or running errands. You can also deduct the cost of gasoline used while traveling for business.

Using the standard mileage rates involves calculating how many miles you drive per month. You then multiply this number by the IRS-provided mileage rate.

Can married couples use a qualified joint venture?

Married couples business owners should know about the rules for employing family members. A qualified joint venture can elect not to be taxed as a partnership. This means that the couple won’t pay taxes on income earned by family members.

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