Self-Employed Tax Questions: Which Federal Tax Forms Should I File For My Sole Proprietorship?

December 18, 2011 by  Filed under: Taxes 

If you’re self-employed and new to the world of taxes, there are numerous tax forms you may be required to file. Here’s an overview of the most common tax forms needed by the typical sole proprietor.

Income Taxes. A sole proprietor does not file a separate business income tax return. Instead, you will file Schedule C or Schedule C-EZ as part of your federal personal income tax return (Form 1040). The “bottom line” from either of these forms flows to Form 1040, page 1. The entire Form 1040, including Schedule C or C-EZ, is due on April 15.

Note: Schedule C-EZ is a much simpler version of Schedule C, but you must meet at least ten conditions in order to qualify to use it. These conditions are listed on page 1 of Schedule C-EZ.

Self-employment Taxes. If you show a profit of at least $400 on Schedule C or C-EZ, you must also file Schedule SE as part of your personal income tax return to calculate self-employment taxes, which are the self-employed person’s version of the Social Security and Medicare taxes paid by employees.

Other Income Tax Forms. Depending on the complexity of your tax situation and the specific deductions you claim on Schedule C, you may need to file any number of other forms to provide details on certain deductions. Some of these additional forms include Form 8829 (Home Office Deduction) and Form 4562 (Depreciation and/or the Section 179 Deduction).

Estimated Tax Payments. Depending on your situation, you may have to make quarterly estimated tax payments via Form 1040-ES. These payments are due on April 15, June 15, September 15 and January 15.

Employee Payroll Forms. If you hire employees, you’ll have a small mountain of paperwork to climb throughout the year. Form 941 is due quarterly (by April 30, July 31, October 31 and January 31) and reports wages, federal income tax withholdings, and Social Security and Medicare taxes (both employee withholdings and the employer match). Form 940 is due annually (January 31) and reports federal unemployment tax. Forms W-2 and W-3 are due annually and report a plethora of payroll related information to both employees (January 31) and the Social Security Administration (February 28).

Independent Contractor Forms. If you hire independent contractors, you must file Form 1099-MISC for each contractor to whom you pay at least $600 for services rendered (i.e. non-employee compensation) during the year. You must send a 1099 to each recipient by January 31, and you must send a copy of the 1099’s, along with Form 1096, to the IRS by February 28.

Welcome to the tax world of the self-employed!

Looking for more small business tax deductions? For a free copy of the Special Report “How to Instantly Double Your Small Business Tax Deductions” visit Wayne Davies is author of 3 eBooks on tax reduction strategies for small business owners and the self-employed.

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