For the latest information about developments related to Pub. 334, such as legislation enacted after it was published, go to IRS.gov/Pub334.
This publication provides general information about the federal tax laws that apply to you if you are a self-employed person or a statutory employee. This publication has information on business income, expenses, and tax credits that may help you, as a small business owner, file your income tax return.
This publication does not cover the topics listed in the following table.
| IF you need information about: | THEN you should see: |
| Corporations | Pub. 542 |
| Farming | Pub. 225 |
| Fishermen (Capital Construction Fund) | Pub. 595 |
| International business | IRS.gov/International |
| Partnerships | Pub. 541 |
| Passive activities | Pub. 925 |
| Recordkeeping and starting a business | Pub. 583 |
| Rental | Pub. 527 |
| S corporations | Instructions for Form 1120-S |
You are a self-employed person if you carry on a trade or business as a sole proprietor or an independent contractor.
. You do not have to carry on regular full-time business activities to be self-employed. Having a part-time business in addition to your regular job or business may be self-employment. .
Trade or business. A trade or business is generally an activity carried on to make a profit. The facts and circumstances of each case determine whether or not an activity is a trade or business. You do not need to actually make a profit to be in a trade or business as long as you have a profit motive. You do need to make ongoing efforts to further the interests of your business.
Limited liability company (LLC). An LLC is an entity formed under state law by filing articles of organization. Generally, for income tax purposes, a single-member LLC is disregarded as an entity separate from its owner and reports its income and deductions on its owner's federal income tax return. For example, if the single-member LLC is not engaged in farming and the owner is an individual, they may use Schedule C.
Sole proprietor. A sole proprietor is someone who owns an unincorporated business by themselves. You are also a sole proprietor for income tax purposes if you are an individual and the sole member of a domestic LLC unless you elect to have the LLC treated as a corporation.
Independent contractor. People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. However, whether they are independent contractors or employees depends on the facts in each case. The general rule is that an individual is an independent contractor if the person paying for the work has the right to control or to direct only the result of the work and not how it will be done. The earnings of a person who is working as an independent contractor are subject to self-employment tax. For more information on determining whether you are an employee or independent contractor, see Pub. 15-A, Employer's Supplemental Tax Guide.
A statutory employee has a checkmark in box 13 of their Form W-2, Wage and Tax Statement. Statutory employees use Schedule C to report their wages and expenses.
If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Do not use Schedule C. Instead, file Form 1065, U.S. Return of Partnership Income. For more information, see Pub. 541, Partnerships.
Exception—Community income. If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U.S. territory, you can treat the business either as a sole proprietorship or a partnership. States with community property laws include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. A change in your reporting position will be treated as a conversion of the entity. See Pub. 555 for more information about community property laws.
Exception—Qualified joint venture (QJV). If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a QJV instead of a partnership for the tax year. Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. For an explanation of "material participation," see the instructions for Schedule C (Form 1040), line G.
. Only businesses that are owned and operated by spouses as co-owners (and not in the name of a state law entity) qualify for the election. Thus, a business owned and operated by spouses through an LLC does not qualify for the election of a QJV. .
To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Each of you must file a separate Schedule C and a separate Schedule SE. For more information, see Qualified Joint Ventures in the Instructions for Schedule SE.
What you need to know. Table A provides a list of questions you need to answer to help you meet your federal tax obligations. After each question is the location in this publication where you will find the related discussion.
The IRS mission. Provide America's taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.
Comments and suggestions. We welcome your comments about this publication and suggestions for future editions.You can send us comments through IRS.gov/FormComments. Or, you can write to the Internal Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224.Although we can’t respond individually to each comment received, we do appreciate your feedback and will consider your comments and suggestions as we revise our tax forms, instructions, and publications. Don’t send tax questions, tax returns, or payments to the above address.
Getting answers to your tax questions. If you have a tax question not answered by this publication or the How To Get Tax Help section at the end of this publication, go to the IRS Interactive Tax Assistant page at IRS.gov/Help/ITA where you can find topics by using the search feature or viewing the categories listed.
Getting tax forms, instructions, and publications. Go to IRS.gov/Forms to download current and prior-year forms, instructions, and publications.
Ordering tax forms, instructions, and publications. Go to IRS.gov/OrderForms to order current forms, instructions, and publications; call 800-829-3676 to order prior-year forms and instructions. The IRS will process your order for forms and publications as soon as possible. Don’t resubmit requests you’ve already sent us. You can get forms and publications faster online.
( Note. The following is a list of questions you may need to answer so you can fill out your federal income tax return. Chapters are given to help you find the related discussion in this publication.)
| What must I know? | Where to find the answer |
|---|---|
| What kinds of federal taxes do I have to pay? How do I pay them? | See chapter 1. |
| What forms must I file? | See chapter 1. |
| What must I do if I have employees? | See Employment Taxes in chapter 1. |
| Do I have to start my tax year in January, or can I start it in any other month? | See Accounting Periods in chapter 2. |
| What method can I use to account for my income and expenses? | See Accounting Methods in chapter 2. |
| What must I do if I disposed of business property during the year? | See chapter 3. |
| What kinds of business income do I have to report on my tax return? | See chapter 5. |
| What kinds of business expenses can I deduct on my tax return? | See Business Expenses in chapter 8. |
| What kinds of expenses are not deductible as business expenses? | See Expenses You Cannot Deduct in chapter 8. |
| What happens if I have a business loss? Can I deduct it? | See chapter 9. |
| What are my rights as a taxpayer? | See chapter 11. |
| Where do I go if I need help with federal tax matters? | See chapter 12. |
The following are some of the tax changes for 2023.
Maximum net earnings. The maximum net self-employment earnings subject to the social security part of the self-employment tax is $160,200 for 2023. There is no maximum limit on earnings subject to the Medicare part.
Standard mileage rate. For 2023, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use during 2023 increased to 65.5 cents a mile.For more information, see Car and Truck Expenses in chapter 8.
Redesigned Form 1040-SS. For 2023, Schedule(s) C and SE (Form 1040) are available to be filed with Form 1040-SS, if applicable. For additional information, see the Instructions for Form 1040-SS.
Bonus depreciation. The bonus depreciation deduction under section 168(k) begins its phaseout in 2023 with a reduction of the applicable limit from 100% to 80%.
Form 7205, Energy efficient commercial buildings deduction. This form and its separate instructions are used to claim the section 179D deduction for qualifying energy efficient commercial building expenses that are now reported on new line 27b of Schedule C (Form 1040). See Form 7205 and its instructions for more information.
Commercial clean vehicle credit. Businesses that buy a qualified commercial clean vehicle may qualify for a clean vehicle tax credit. See Form 8936 and its instructions for more information.
Business meal expense. The temporary 100% deduction for business meal expense has expired. The business meal deduction reverts back to the previous 50% allowable deduction beginning January 1, 2023. See Meals and lodging , later, for more information.
The following are some of the tax changes for 2024. For information on other changes, go to IRS.gov.
Maximum net earnings. The maximum net self-employment earnings subject to the social security part of the self-employment tax is $168,600 for 2024.
Standard mileage rate. For 2024, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 67 cents a mile.
Excess business loss limitation. Your loss from a trade or business may be limited. Use Form 461 to determine the amount of your excess business loss, if any. Your excess business loss will be included as income on line 8p of Schedule 1 (Form 1040) and treated as a net operating loss (NOL) that you must carry forward and deduct in a subsequent tax year.For more information about the excess business loss limitation, see Form 461 and its instructions.
Qualified paid sick leave and qualified paid family leave payroll tax credit. Generally, the credit for qualified sick and family leave wages, as enacted under the Families First Coronavirus Response Act (FFCRA) and amended and extended by the COVID-related Tax Relief Act of 2020, for leave taken after March 31, 2020, and before April 1, 2021, and the credit for qualified sick and family leave wages under sections 3131, 3132, and 3133 of the Internal Revenue Code, as enacted under the American Rescue Plan Act of 2021 (the ARP), for leave taken after March 31, 2021, and before October 1, 2021, have expired. However, employers that pay qualified sick and family leave wages in 2023 for leave taken after March 31, 2020, and before October 1, 2021, are eligible to claim a credit for qualified sick and family leave wages in the quarter of 2023 in which the qualified wages were paid. For more information, see Form 941, lines 11b, 11d, 13c, and 13e; and Form 944, lines 8b, 8d, 10d, and 10f. You must include the full amount (both the refundable and nonrefundable portions) of the credit for qualified sick and family leave wages in gross income on line 3 or 4, as applicable, for the tax year that includes the last day of any calendar quarter with respect to which a credit is allowed.
A credit is available only if the leave was taken after March 31, 2020, and before October 1, 2021, and only after the qualified leave wages were paid, which might, under certain circumstances, not occur until a quarter after September 30, 2021, including qualifying quarterly payments made during 2023. Accordingly, all lines related to qualified sick and family leave wages remain on the employment tax returns for 2023.
Reportable transactions. You must file Form 8886, Reportable Transaction Disclosure Statement, to report certain transactions. You may have to pay a penalty if you are required to file Form 8886 but do not do so. You may also have to pay interest and penalties on any reportable transaction understatements. Reportable transactions include:
For more information, see the Instructions for Form 8886 or Abusive Tax Shelters and Transactions.
Small Business and Self-Employed (SB/SE) Tax Center. Do you need help with a tax issue or preparing your return, or do you need a free publication or form? The SB/SE Tax Center serves taxpayers who file Form 1040; Form 1040-SR; Schedule C, E, or F; or Form 2106, as well as small business taxpayers with assets under $10 million. For additional information, go to the SB/SE Tax Center at IRS.gov/Businesses/Small.
Gig Economy Tax Center. The gig (or on-demand, sharing, or access) economy refers to an area of activity where people earn income providing on-demand work, services, or goods. Go to IRS.gov/Gig to get more information about the tax consequences of participating in the gig economy.
The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
This chapter explains the business taxes you may have to pay and the forms you may have to file. It also discusses taxpayer identification numbers (TINs).
Table 1-1 lists the benefits of filing electronically.
Table 1-2 lists the federal taxes you may have to pay, their due dates, and the forms you use to report them.
Table 1-3 provides checklists that highlight the typical forms and schedules you may need to file if you ever go out of business.
. You may want to get Pub. 509, Tax Calendars. It has tax calendars that tell you when to file returns and make tax payments. .
Publication
Form (and Instructions)
See chapter 12 for information about getting publications and forms.
This section explains three types of TINs, who needs them, when to use them, and how to get them.
Social security number (SSN).
Generally, use your SSN as your TIN. You must put this number on each of your individual income tax forms, such as Form 1040 and its schedules.
To apply for an SSN, use Form SS-5 , Application for a Social Security Card. This form is available at Social Security Administration (SSA) offices or by calling 800-772-1213. It is also available from the SSA website at SSA.gov/forms/ss-5.
Individual taxpayer identification number (ITIN).
The IRS will issue an ITIN if you are a nonresident or resident alien and you do not have and are not eligible to get an SSN. The ITIN will expire for any taxpayer who does not file a federal income tax return (or who is not included as a dependent on the return of another taxpayer) for 3 consecutive years. In general, if you need to obtain an ITIN, you must attach Form W-7 , Application for IRS Individual Taxpayer Identification Number, with your signed, original, completed tax return and any other required documentation and mail them to the address in the Instructions for Form W-7. Exceptions are covered in the instructions. If you must include another person's SSN on your return and that person does not have and cannot get an SSN, enter that person's ITIN. The application is also available in Spanish. The form is available at IRS.gov/FormW7.
. An ITIN is for tax use only. It does not entitle the holder to social security benefits or change the holder's employment or immigration status. .
Employer identification number (EIN).
You must also have an EIN to use as a TIN if you do either of the following.
If you must have an EIN, include it along with your SSN on your Schedule C as instructed.
You can apply for an EIN:
New EIN.
You may need to get a new EIN if either the form or the ownership of your business changes. For more information, see Pub. 1635, Understanding Your EIN.
When you need identification numbers of other persons.
In operating your business, you will probably make certain payments you must report on information returns. These payments are discussed under Information Returns , later in this chapter. You must give the recipient of these payments (the payee) a statement showing the total amount paid during the year. You must include the payee's identification number and your identification number on the returns and statements.
Employee.
If you have employees, you must get an SSN from each of them. Record the name and SSN of each employee exactly as they are shown on the employee's social security card. If the employee's name is not correct as shown on the card, the employee should request a new card from the SSA. This may occur if the employee's name was changed due to marriage or divorce.
Form W-4, Employee's Withholding Allowance Certificate, is completed by each employee so the correct federal income tax can be withheld from their pay.
If your employee does not have an SSN, they should file Form SS-5 with the SSA.
Other payee.
If you make payments to someone who is not your employee and you must report the payments on an information return, get that person's SSN. If you must report payments to an organization, such as a corporation or partnership, you must get its EIN.
To get the payee's SSN or EIN, use Form W-9 , Request for Taxpayer Identification Number and Certification.
A payee who does not provide you with an identification number may be subject to backup withholding. For information on backup withholding, see the Instructions for the Requester of Form W-9 and the General Instructions for Certain Information Returns.
This part explains whether you have to file an income tax return and when you file it. It also explains how you pay the tax.
You have to file an income tax return for 2023 if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Instructions for Form 1040.
File your income tax return on Form 1040 or 1040-SR and attach Schedule C . Enter the net profit or loss from Schedule C on Schedule 1 (Form 1040). Use Schedule C to figure your net profit or loss from your business. If you operated more than one business as a sole proprietorship, you must attach a separate Schedule C for each business.
I.R.S. e-file logo
Summary: This is an illustration of the logo used to identify the I.R.S. e-file program.
You may be able to file your tax returns electronically using an IRS e-file option. Table 1-1 lists the benefits of IRS e-file . IRS e-file uses automation to replace most of the manual steps needed to process paper returns. As a result, the processing of IRS e-file returns is faster and more accurate than the processing of paper returns. As with a paper return, you are responsible for making sure your return contains accurate information and is filed on time.
Using IRS e-file does not affect your chances of an IRS examination of your return.
You can file most commonly used business forms using IRS e-file . For more information, go to IRS.gov.
Electronic signatures.
Paperless filing is easier than you think and it's available to most taxpayers who file electronically—including those first-time filers who were 16 or older at the end of 2023. If you file electronically using tax preparation software or a tax professional, you will sign your return using the Self-Select PIN (personal identification number) Method for IRS e-file . If you are married filing jointly, you and your spouse will each need to create a PIN and enter these PINs as your electronic signatures.
To create a PIN, you must know your adjusted gross income (AGI) from your originally filed 2022 income tax return (not from an amended return, Form 1040-X, or after receiving any math error notice from the IRS). You will also need to provide your date of birth (DOB). Make sure your DOB is accurate and matches the information on record with the SSA before you e-file . To do this, check your annual Social Security Statement.
With a Self-Select PIN, there is nothing to sign and nothing to mail—not even your Form(s) W-2. For more details on the Self-Select PIN Method, go to IRS.gov.
State returns.
In most states, you can file an electronic state return simultaneously with your federal return. For more information, check with your state tax agency, tax professional, or IRS.gov.
Refunds.
You can have your refund check mailed to you, or you can have your refund deposited directly to your checking or savings account.
With IRS e-file , your refund will be issued in half the time as when filing on paper. Most refunds are issued in less than 21 days.
Offset against debts.
As with a paper return, you may not get all of your refund if you owe certain past-due amounts, such as federal tax, state tax, a student loan, or child support. You will be notified if the refund you claimed has been offset against your debts.
Refund inquiries.
You can check the status of your refund if it has been at least 24 hours (4 weeks if you mailed a paper return) from the date you filed your return. Be sure to have a copy of your tax return available because you will need to know the filing status, the first SSN shown on the return, and the exact whole-dollar amount of the refund. To check on your refund, do one of the following.
The IRS can’t issue refunds before mid-February 2024 for returns that claimed the earned income credit or the additional child tax credit. This applies to the entire refund, not just the portion associated with these credits.
Balance due.
If your return shows that you owe tax, you must pay it by the due date of your return (without regard to any extension to file) to avoid late-payment penalties and interest. For calendar year 2023, pay by April 15, 2024. You have many options for making your payment, including by scheduling an electronic funds withdrawal from your checking or savings account or by debit or credit card. For more information about your payment options, go to IRS.gov/Payments.
Many tax professionals can electronically file paperless returns for their clients. You have two options.
You will be asked to complete Form 8879, IRS e-file Signature Authorization, to authorize the provider to enter your self-selected PIN on your return.
Depending on the provider and the specific services requested, a fee may be charged. To find an authorized IRS e-file provider near you, go to IRS.gov/Efile/Providers.
A computer with Internet access is all you need to file your tax return using IRS e-file . When you use your personal computer, you can e-file your return from your home any time of the day or night. Sign your return electronically using a self-selected PIN to complete the process. There is no signature form to submit or Forms W-2 to send in.
Free software options for doing your taxes.
If your AGI was $79,000 or less in 2023, you can use free tax software to prepare and e-file your tax return.
Free File.
This public-private partnership, between the IRS and tax software providers, makes approximately a dozen brand-name commercial software products and e-file available for free. Just go to IRS.gov/FreeFile for details. You can review each software provider's criteria for free usage or use an online tool to find which free software products match your situation. Some software providers offer state tax return preparation for free.
Free File Fillable Forms.
The IRS also offers electronic versions of IRS paper forms that can also be e-filed for free. Free File Fillable Forms is best for people experienced in preparing their own tax returns. There is no income limitation to using these forms. Free File Fillable Forms does basic math calculations. It supports only federal tax forms.
Some businesses offer free e-file to their employees, members, or customers. Others offer it for a fee. Ask your employer or financial institution if they offer IRS e-file as an employee, member, or customer benefit.
Free help in preparing your return is available nationwide from IRS-trained volunteers. The Volunteer Income Tax Assistance (VITA) program is designed to help low-income taxpayers, and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 or older with their tax returns. Some locations offer free electronic filing.
| Accuracy | • | Your chance of getting an error notice from the IRS is significantly reduced. |
| Security | • | Your privacy and security are assured. |
| Electronic signatures | • | Create your own personal identification number (PIN) and file a completely paperless return through your tax preparation software or tax professional. There is nothing to mail. |
| Proof of acceptance | • | You receive an electronic acknowledgment within 48 hours that the IRS has accepted your return for processing. |
| Fast refunds | • | You get your refund faster with direct deposit. |
| Free Internet filing options | • | Use IRS.gov to access commercial tax preparation and e-file services available at no cost to eligible taxpayers. |
| Electronic payment options | • | Convenient, safe, and secure electronic payment options are available. E-file and pay your taxes in a single step. Schedule direct payment from your checking or savings account (up to and including April 15, 2024) or pay by debit or credit card. |
| Federal/State filing | • | Prepare and file your federal and state tax returns together and double the benefits you get from e-file . |
For calendar year 2023, Form 1040 or 1040-SR is due by April 15, 2024. If you use a fiscal year (explained in chapter 2), your return is due by the 15th day of the 4th month after the end of your fiscal year. If you file late, you may have to pay penalties and interest.
If you cannot file your return on time, use Form 4868 , Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, to request an automatic 6-month extension. For calendar year taxpayers, this will extend the tax filing due date until October 15. Filing an extension does not extend the time to pay your taxes, only the time to file the tax return.
Federal income tax is a pay-as-you-go tax. You must pay it as you earn or receive income during the year. An employee usually has income tax withheld from their pay. If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax.
Estimated tax payments.
You generally have to make estimated tax payments if you expect to owe taxes, including self-employment tax (discussed later), of $1,000 or more when you file your return. Use Form 1040-ES to figure and pay the tax. If you do not have to make estimated tax payments, you can pay any tax due when you file your return. For more information on estimated tax, see Pub. 505.
What are my options for paying estimated tax?
You can pay your estimated tax electronically using various options. If you pay electronically, there is no need to mail in Form 1040-ES payment vouchers. These options include:
Other options include crediting an overpayment from your 2022 return to your 2023 estimated tax, or mailing a check or money order with a Form 1040-ES payment voucher.
Penalty for underpayment of tax.
If you did not pay enough income tax and self-employment tax for 2023 by withholding or by making estimated tax payments, you may have to pay a penalty on the amount not paid. The IRS will figure the penalty for you and send you a bill. Or you can use Form 2210 , Underpayment of Estimated Tax by Individuals, Estates, and Trusts, to see if you have to pay a penalty and to figure the penalty amount. For more information, see Pub. 505.
SE tax is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners.
. If you earned income as a statutory employee, you do not pay SE tax on that income. Social security and Medicare taxes should have already been withheld from those earnings. .
Social security coverage.
Social security benefits are available to self-employed persons just as they are to wage earners. Your payments of SE tax contribute to your coverage under the social security system. Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits.
. Be sure to report all of your self-employment income. By not reporting all of it, you could cause your social security benefits to be lower when you retire. .
How to become insured under social security.
You must be insured under the social security system before you begin receiving social security benefits. You are insured if you have the required number of credits (also called quarters of coverage), discussed next.
Earning credits in 2023 and 2024.
For 2023, you received one credit, up to a maximum of four credits, for each $1,640 ($1,730 for 2024) of income subject to social security tax. Therefore, for 2023, if you had income (self-employment and wages) of $6,560 that was subject to social security tax, you received four credits ($6,560 ÷ $1,640).
For an explanation of the number of credits you must have to be insured and the benefits available to you and your family under the social security program, consult your nearest SSA office.
. Making false statements to get or to increase social security benefits may subject you to penalties. .
The SSA time limit for posting self-employment income.
Generally, the SSA will give you credit only for self-employment income reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. If you file your tax return or report a change in your self-employment income after this time limit, the SSA may change its record but only to remove or reduce the amount. The SSA will not change its records to increase your self-employment income.
Who must pay SE tax.
You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies.
. The SE tax rules apply no matter how old you are and even if you are already receiving social security or Medicare benefits. .
SE tax rate.
The SE tax rate on net earnings is 15.3% (12.4% social security tax plus 2.9% Medicare tax).
Maximum earnings subject to SE tax.
Only the first $160,200 of your combined wages, tips, and net earnings in 2023 is subject to any combination of the 12.4% social security part of SE tax, social security tax, or the Tier 1 part of railroad retirement tax.
All your combined wages, tips, and net earnings in 2023 are subject to any combination of the 2.9% Medicare part of SE tax, Medicare tax, or Medicare part of railroad retirement tax.
If wages and tips you receive as an employee are subject to either social security tax or the Tier 1 part of railroad retirement tax, or both, and total at least $160,200, do not pay the 12.4% social security part of the SE tax on any of your net earnings. However, you must pay the 2.9% Medicare part of the SE tax on all your net earnings.
. Deduct one-half of your SE tax as an adjustment to income on line 15 of Schedule 1 (Form 1040).
.
Additional Medicare Tax.
A 0.9% Additional Medicare Tax may apply to you if your net earnings from self-employment exceed one of the following threshold amounts (based on your filing status).
If you have both wages and self-employment income, the threshold amount for applying the Additional Medicare Tax on the self-employment income is reduced (but not below zero) by the amount of wages subject to Additional Medicare Tax. Use Form 8959, Additional Medicare Tax, to figure this tax.
More information.
For information on methods of calculating SE tax, see chapter 10.
| IF you are liable for. | THEN use Form. | DUE by. 1 |
|---|---|---|
| Income tax | 1040, or 1040-SR, and Schedule C 2 | 15th day of 4th month after end of tax year. |
| Self-employment tax | Schedule SE | File with Form 1040, Form 1040-SR, or 1040-SS. |
| Estimated tax | 1040-ES | 15th day of 4th, 6th, and 9th months of tax year, and 15th day of 1st month after the end of tax year. |
| Social security and Medicare taxes and income tax withholding | 941 or 944 | April 30, July 31, October 31, and January 31. 3 |
| See Pub. 15. | ||
| Providing information on social security and Medicare taxes and income tax withholding | W-2 (to employee) |
| 1 If a due date falls on a Saturday, Sunday, or legal holiday, file by the next day that is not a Saturday, Sunday, or legal holiday. For more information, see Pub. 509. |
| 2 File a separate schedule for each business. |
| 3 See the form instructions if you go out of business, change the form of your business, or stop paying wages. |
| 4 Form 1099-NEC—to the IRS by January 31 (even if filing electronically) if you are reporting nonemployee compensation. |
If you have employees, you will need to file forms to report employment taxes. Employment taxes include the following items.
For more information, see Pub. 15 (Circular E), Employer's Tax Guide. That publication explains your tax responsibilities as an employer.
. Do not reduce your deduction for social security and Medicare taxes by the nonrefundable and refundable portions of the FFCRA and ARP of 2021 credits for qualified sick and family leave wages claimed on an employment tax return. Instead, report the credits as income. .
To help you determine whether the people working for you are your employees, see Pub. 15-A. That publication has information to help you determine whether an individual is an independent contractor or an employee.
. If you incorrectly classify an employee as an independent contractor, you may be held liable for employment taxes for that worker plus a penalty. .
An independent contractor is someone who is self-employed. You generally do not have to withhold or pay any taxes on payments made to an independent contractor.
This section identifies some of the excise taxes you may have to pay and the forms you have to file if you do any of the following.
Form 720.
The federal excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, consist of several broad categories of taxes, including the following.
Form 2290.
There is a federal excise tax on the use of certain trucks, truck tractors, and buses on public highways. The tax applies to vehicles having a taxable gross weight of 55,000 pounds or more. Report the tax on Form 2290, Heavy Highway Vehicle Use Tax Return. For more information, see the Instructions for Form 2290.
Depositing excise taxes.
If you have to file a quarterly excise tax return on Form 720, you may have to deposit your excise taxes before the return is due. For details on depositing excise taxes, see the Instructions for Form 720.
If you make or receive payments in your business, you may have to report them to the IRS on information returns. The IRS compares the payments shown on the information returns with each person's income tax return to see if the payments were included in income. You must give a copy of each information return you are required to file to the recipient or payer. In addition to the forms described below, you may have to use other returns to report certain kinds of payments or transactions. For more details on information returns and when you have to file them, see the General Instructions for Certain Information Returns.
Form 1099-MISC.
Use Form 1099-MISC, Miscellaneous Information, to report certain payments you make in your business. These payments include the following items.
You also use Form 1099-MISC to report your sales of $5,000 or more of consumer products to a person for resale anywhere other than in a permanent retail establishment.
Form 1099-NEC.
File Form 1099-NEC, Nonemployee Compensation, for each person in the course of your business to whom you have paid at least $600 during the year in:
You must also file Form 1099-NEC for each person from whom you have withheld any federal income tax (report in box 4) under the backup withholding rules regardless of the amount of the payment.
. If you use Form 1099-NEC to report sales totaling $5,000 or more of consumer products, then you are required to file Form 1099-NEC with the IRS by January 31. .
Form W-2.
You must file Form W-2 to report payments to your employees, such as wages, tips, and other compensation; and withheld income, social security, and Medicare taxes. You can file Form W-2 online. For more information about Form W-2, see the General Instructions for Forms W-2 and W-3.
Penalties.
The law provides for the following penalties if you do not file Form(s) 1099-MISC, Form(s) 1099-NEC, or Form(s) W-2 or do not correctly report the information. For more information, see the General Instructions for Certain Information Returns.
Waiver of penalties.
These penalties will not apply if you can show that the failure was due to reasonable cause and not willful neglect.
In addition, there is no penalty for failure to include all required information, or for including incorrect information, on a de minimis (small) number of information returns if you correct the errors by August 1 of the year the returns are due. (A de minimis number of returns is the greater of 10 or ½ of 1% of the total number of returns you are required to file for the year.)
Form 8300.
You must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if you receive more than $10,000 in cash in one transaction, or two or more related business transactions. Cash includes U.S. and foreign coin and currency. It also includes certain monetary instruments such as cashier's and traveler's checks and money orders. Cash does not include a check drawn on an individual's personal account (personal check). For more information, see Pub. 1544, Reporting Cash Payments of Over $10,000.
Penalties.
There are civil and criminal penalties, including up to 5 years in prison, for not filing Form 8300, filing (or causing the filing of) a false or fraudulent Form 8300, or structuring a transaction to evade reporting requirements.