Be prepared to use Schedule C to report your accounting method, gross receipts, sales, income, cost of goods sold, and deductible business expenses. According to the IRS, Schedule C is required when the primary purpose of your business is for income or profit and you are regularly involved in the activity. ![]() And, as is the case with other types of business entities, sole proprietors are also subject to self-employment taxes.Īs a sole proprietor, instead of filing a separate tax return for your business, you report your business income on IRS Form 1040, using Schedule C to report your business profit or loss. Note that even if your self-employment earnings were less than $400, you might still have a tax filing obligation, as explained more in the instructions to IRS Form 1040. Under IRS rules, you must file an income tax return if your net earnings from your business totaled $400 or more. Most sole proprietors need to file income tax returns and pay taxes on their business income. When and how do I file and pay taxes as a sole proprietor?
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