You are considered to be self-employed if you engage in a trade or business as a sole-proprietor or an independent contractor.\u00a0 Some examples would be a photographer operating out of their home, a building contractor, an electrician, or a plumber.\u00a0 The self-employed income tax status can also apply to persons who provide products or services on a part-time basis to supplement the income they receive elsewhere.<\/p>\n
Income taxes for the self-employed are similar to that of any other employee.\u00a0 Whereas employers are responsible for deducting Social Security and Medicare taxes from their employee’s paychecks, the self-employed are required to pay these taxes themselves.\u00a0 This tax is referred to as the Self-Employment Tax (SE).<\/p>\n
The self-employed take on the added responsibility of not only promoting and selling their product or service, but keeping track of the expenses associated with promoting and selling their product or service.\u00a0 To ensure that at the end of the year, you have taken full advantage of the tax credits and tax deductions available to you, you should be fully knowledgeable of those provisions (or employ a trusted tax accountant or tax preparation professional).\u00a0 If you hire a tax accountant, ask them what documentation needs to be collected throughout the year so you can utilize those income tax benefits available to you.<\/p>\n
Some of the more obvious income tax deductions are the expenses associated with operating a business of your own.\u00a0 These might include the following items:<\/p>\n
Some of the less obvious expenses that may be deductible on your income tax return include the following:<\/p>\n
For a more complete listing of qualifying tax deductions and the proper documentation of these expenses, look at IRS Publication 525.<\/p>\n