How to Report Self-Employment Income from Multiple Sources
Are you one of the millions of Americans who chases the dream of getting ahead AND being your own boss? The U.S. has an estimated 10 million people who are self employed, which accounts for nearly 6.6% of all reported jobs. And, of course, there are many benefits to being self employed: flexibility and making your own decisions about everything from company direction to hours and pay are a few of the big ones.
When it comes to taxes, owning your own business can get a little more complicated. Many of those Americans who are self-employed actually try their hand in many different businesses and end up having to report tax income from multiple sources. If you are one of these self-starting entrepreneurs with multiple sources of self-employment income, here are some tricks to make sure that when April 15th rolls around, your taxes are ready to go!
1. The Schedule C Form is the tax form that you will need to complete as part of your tax return to report your self-employment income.
2. If you have multiple sources of self-employment income and the work is closely related, you are allowed to report them on the same Schedule C Form.
3. If the work that you do is unrelated, you should complete a different Schedule C Form for each.
4. You should keep entirely separate records for each business activity – including receipts for things like office supplies, travel, and mileage. This will help make sure that you deduct all possible business related expenses. Keeping impeccable records is one of the most important things to do if you are self-employed.
5. There is no minimum amount of income you are required to report. The IRS expects to see you account for all of your income. You must pay self-employment tax on income of over $400 or more.
6. Estimate your taxes. It is very difficult to know exactly how your self-employment income will impact your tax return from year to year. We strongly recommend that you not wait until April to see where you land. It may be wise to enlist the help of a reputable tax firm that can help you estimate your taxes for the year. That way, if you are going to be in a position to owe the IRS, you can make plans for this and not get caught surprised. If you are going to end up with money in your pocket come April, then how great will you feel knowing that some extra money is on the way!
7. Additional review. If you are self-employed, you can expect the IRS to give your tax return a little extra attention. You want to be absolutely sure that your return is correct and that you have completed all necessary paperwork and have made all possible deductions. Many individuals who are self-employed choose to partner with a tax firm for peace of mind. This can help protect you from an audit all together and if the IRS has questions, your tax firm can help you provide the answers.
Success Tax Relief has helped thousands of self-employed Americans handle their taxes. Contact us today to see what we can do for you.