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 percent 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 taxable 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!
Seven Tricks to Make Sure Your Taxes are Ready to Go Even if You’re Self-Employed
1. The Schedule C Form
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. Make sure that you’re looking at the correct form. Unfortunately, many taxpayers waste a ton of time filing the incorrect document and only realize it much later when they’ve reached an impasse.
2. Multiple Sources of Self-Employment Income
If you have multiple sources of self-employment income and the work is closely related, then you are allowed to report them on the same Schedule C Form. As a general rule, the way that the IRS defines closely related work is relatively charitable so you shouldn’t feel like you have to worry about stretching too much.
3. Unrelated Work
If the work that you do is unrelated, then you should complete a different Schedule C Form for each. In this case, consider each of your individual sources of self-employment income to be totally separate from one another. While they might not be completely different businesses, it might help to think of them that way.
4. Keep Separate Records
You should keep entirely separate records for each business activity. This includes receipts for things like office supplies, travel, and mileage. Doing so 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. While IRS agents aren’t necessarily out to get you, they won’t hesitate to disallow deductions that you haven’t been able to correctly document.
5. Minimum Income Reporting
There is no minimum amount of income you are required to report. The IRS expects to see your account for all of your income. You must pay self-employment tax on an income of over $400 or more. In an overwhelming majority of cases, people who are filing for self-employment tax have made $400 or more in the previous year anyway.
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. Get Expert Review
Additional review is always needed, so always make sure to double and then triple check your return before you actually take the plunge and submit it to the feds. If you are self-employed, then 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 the 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.
Requesting Help with Self-Employment Taxes
Success Tax Relief has helped thousands of self-employed Americans handle their taxes. These taxes can be confusing and contradictory in many cases, which makes them even more difficult to follow. Many people who are required to file because they had some income from a self-employed venture inadvertently pay too much because they’re not aware of the fact that they could be taking advantage of deductions that they currently aren’t.
Those who have found themselves consistently paying too little may find themselves in a worse scenario, though, because the IRS might someday send them a bill for everything they owe plus some interest as well as a couple of late charges!
Don’t feel like you have to go this alone. Professionals are standing by to make your situation a much easier one. Contact us today to see what we can do for you.