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Frequently Asked Questions

Self Employment

•    you carry on a trade or business as a sole proprietor or an independent contractor
•    you are a member of a partnership that carries on a trade or business
•    you are in business for yourself and receive payments for products or services you provide but you are not an employee

on Thursday November 29 by jtejada2983
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Like Social Security and Medicare taxes withheld for most employees, self-employment taxes are the Social Security and Medicare amounts withheld on income primarily for individuals who work for themselves. You must pay self-employment tax if your net earnings from self-employment (not church related) are $400 or more, or if you made $108.28 or more as a church employee. Special self-employment tax rules for caregivers, or individuals who work in the homes of elderly or disabled individuals, can be found in Publication 926.

The self-employment tax rate for income earned in 2014 is 15.3%. This rate is broken down into 12.4% for Social Security (old-age, survivors, and disability insurance) on earnings up to $118,500 and 2.9% for Medicare (hospital insurance). In addition, if your adjusted gross income (AGI) is more than $200,000 ($250,000 if married filing jointly), the income over this AGI is subject to an additional 0.9% additional Medicare tax.

on Thursday November 29 by jtejada2983
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You must report all income you receive from your business on your tax return unless it is excluded by law. If you own more than one business, you must file a separate tax return for each business.

To file your return, you must use Schedule C or Schedule C-EZ to report your income or loss. If a reported loss is caused by an activity “not engaged in for profit,” the loss is not allowed as a deduction against other income. Small business and individuals who are in business for themselves and make under $5,000 may be able to use Schedule C-EZ. When a net profit of at least $400 is reported on the Schedule C or C-EZ, Schedule SE should be filed. Other tax forms may be needed, depending on the type of business and where the business operates.

Business with two or more owners generally are not eligible to use Schedule C. A partnership return would have to be filed unless you are qualified for some other type of business return. A married couple who jointly operate an unincorporated business and who file a joint return can elect not to be treated as a partnership for tax purposes. The husband and wife can be the only members of the qualified joint venture and both must materially participate in the business.

on Thursday November 29 by jtejada2983
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