INFORMATION ABOUT TAXES
Important Guidelines
Self-Employed Taxes
Filing self-employed taxes is more complex than for W-2 employees. You need to carefully track tax deductions and all sources of income. When preparing self-employed taxes, you will need to complete Schedule C.
Individual Taxes: Form 1040
For individual taxes, Form 1040 allows for the following filing statuses:
Single
Head of Household
Married Filing Jointly
Married Filing Separately
Qualifying Widow(er) with Dependent Child
Self-Employed Tax Deductions
Tax deductions are crucial for self-employed individuals as they can significantly lower your tax liability. The key is to know which deductions apply to your business.
Self-Employed Income Reporting
Self-employed businesses use Form 1099 to report income. There are several types of 1099 forms, with 1099-K and 1099-MISC being the most common. Businesses issue these forms to report income for independent contractors. Additionally, 1099-NEC is used for reporting non-employee compensation.
Independent Contractors
The IRS classifies many self-employed workers as independent contractors. These individuals often operate as a one-person business, such as freelance graphic designers or writers. This classification also applies to those working in the sharing economy, such as listing your vehicle on Turo, hosting on Airbnb, driving for Uber, or using Upwork for freelance work. As an independent contractor, you set your own fees and work schedule but are also responsible for calculating and remitting your taxes since no employer is withholding or remitting taxes on your behalf. Many self-employed contractors receive 1099 forms.
If your business is incorporated as a C corporation, you will file Form 1120. This form is more detailed than a Schedule C, requiring additional information and balance sheets for both the start and end of the tax period.
Business Taxes: Form 1120
Form 1099-MISC
Individuals and businesses use Form 1099-MISC to report payments made to contractors. Businesses must issue this form if they pay a contractor more than $600 in a year. For example, if you work as a freelance graphic designer and earn $1,200 from a particular client in a year, you should receive a 1099-MISC from that client. Similarly, if your business pays a contractor more than $600 in a year, you must issue Form 1099-MISC to them.
Payroll Services
A comprehensive payroll service automatically handles payroll calculations, payroll tax statements, year-end taxes, and more for your company. A full-service provider also manages employee deposits and withdrawals, tax withholdings, pay garnishments, and new-hire reporting.
Bookkeeping Services
We efficiently update your books for taxes, loans, or other transactions, providing a clear view of your business’s financial situation. Our online bookkeeping services, offered by Certified QuickBooks ProAdvisors and Xero-Certified Advisors, vary based on your needs. We include accounting software, automated and secure encrypted monthly bank statement downloads, and offer options for back bookkeeping, real-time bookkeeping, payroll, and both full- or part-time bookkeepers. Let us handle the details so you can focus on what you do best.
1099K
A 1099 K is the type of 1099 you will receive from a 3rd party site like Turo, Airbnb, Uber, and Upwork. These companies facilitate payment for your services. It is important to note that a 1099 K will only be issued if you reach 200 transactions and have over 20 K in revenue. In addition, any fees charged by the 3rd party may be subtracted from your total earnings.
IRS Schedule C
An IRS Schedule C is used to report income or loss from a business you operate. It is where you will fill out the income you earned from your business, as well as your deductible expenses. To fill out a Schedule C you will need to gather important information regarding your business. The IRS needs the name of your business as well as the nature of your business.
Book a Service
SMJ Tax Firm and Associates is an all-year tax preparation service that ensures compliance with the IRS.