Before Report Self-Employment or Business Income, Know what You’ll Need
If you need to report self-employment income or business income on a tax return, it’s best to organize the papers you’ll need before getting started.
Filing a Schedule C may seem like a daunting task. However, you can avoid complications by keeping your records organized throughout the year .
It’s also good to keep in mind that doing your taxes online will ultimately save you time and money.
Below, you’ll find the information you’ll need to report when completing a business tax return. Keep in mind, if you’re a sole proprietor, do freelance or contract work, you’re considered a self-employee and are required to file a business tax return (SCH C).
What You’ll Need to Report On Business Tax Return (SCH C)
#1: Income
According to the IRS, you’ll need to report ALL income you’ve received.
Make a list of gross receipts or sales from the tax year. If you received 1099 forms from clients or individuals you provided services for, you’ll need to include these amounts.
The IRS requires you to report ALL income so be sure to include payments you received that aren’t reported on a 1099 form
There’s other amounts you may not think of that the IRS considers forms of income. This includes;
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value of goods or services received through barter transactions
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bad debts recovered that you wrote off on a prior-year return
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interest on any business bank accounts
#2: Expenses
If you’re organized, save receipts and stay on top of your record keeping, you’ll be rewarded when it’s time to report your expenses. If you’re receipts are scattered around your house, car and office, you may want to consider finding a system to help you stay organized.
Whats the big deal? Well, the more you write off as a business expense, the less tax you’ll have to pay. When it comes to taxes, saying organized pays, literally.
Deductible expenses worth keeping track of throughout the year include the following;
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advertising costs
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commission costs
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supplies
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legal fees
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office expenses
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maintenance & repairs
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travel
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meals & entertainment
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car & truck expenses (gas, oil changes, repairs, insurance, etc)
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contributions to pension & profit sharing plans
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wages paid
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depreciation of assets such as equipment, fixtures, furniture, etc.
Any of these expenses reported will be subtracted from your gross income. The outcome will be your net Schedule C profit which you’ll be taxed on, explaining why it’s so important to be SUPER organized with your expenses incurred.
#3: Expenses Relating to Business Use of Your Home
If part of your home used exclusively for business on a regular basis, you can deduct business expenses of your home. To do so you’ll need to report the following information the relates to your home
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total square feet of your home and total used for business use only
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repairs and maintenance directly connected to your business
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other home expenses directly related to your business
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home insurance
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rent
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utilities
#4: Cost of Goods Sold
If you offer a service, whether it be teaching zumba or yoga classes, consultant work or freelance designing, you won’t be able to report costs of good sold on your taxes.
However, if your business sells goods to customers, you can further reduce your gross income by including the cost of goods your sold throughout the tax year. To do so, it’s a good idea to gather together the following information before filing;
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the value of your inventory at the start of the year (probably will be the amount you reported on last year’s tax return as closing inventory)
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the amount of merchandise you purchased
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if applicable, the amount paid to production workers as well as overhead supplies and costs
#5. Other Expenses
Whether you offer a service or goods, you may have incurred other expenses not listed in the above list of business expenses. These additional expenses are labeled as “Other Expenses” by the IRS.
The following are examples of what’s considered “other expenses” on a business tax return;
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professional organization membership dues
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subscriptions to business publications
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credit card fees for processing customer card transactions
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business-related gifts to clients, contractors, suppliers, etc.
File a Business Tax Return with PriorTax!
Reporting self-employment income on a business tax return may seem overwhelming. If you’re preparing it on your own, it will most likely be just that. Instead of pulling your hair out trying to calculate your tax situation, use a tax software site like PriorTax instead.
As a self-employee, you know first hand that time is your most valuable asset. Don’t waste it- get your taxes done quickly and easily with PriorTax! We’ll do the difficult work for you.
Need to get caught up on a previous year tax return? Get started today!
Photo via AnnieAnniePancake on Flickr
