“Self-employed” individuals include sole proprietors and independent contractors. The Self-employment income can include income you received for part-time work. This is in addition to income from your regular job. According to the IRS, there are a few things to keep in mind in reporting income. (http://www.irs.gov/uac/Are-You-Self-Employed-Check-Out-These-IRS-Tax-Tips)
There are two forms used to report self-employment income in addition to your 1040, the Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business. Schedule C-EZ may be used if you had expenses less than $5,000 and meet other conditions. Individuals may have to pay self-employment tax as well as income tax if you made a profit. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, and file with your income taxes.
Individuals who are self-employed may need to make estimated tax payments. I.e. quarterly payments made on income that is not subject to withholding.
Individuals who are self-employed can deduct expenses you paid to run your business that are both ordinary and necessary. “Ordinary expenses” are those that are common and accepted in your industry. “Necessary expenses” are those that are helpful and proper for your trade or business. In most cases, you can deduct expenses in the same year you paid for them, or incurred them. However, you must ‘capitalize’ some costs. This means you can deduct part of the cost over a number of years.
In order to comply with state and federal requirements for self-employed business income reporting, and to benefit from tax programs for income derived from self-employment, individuals who are self-employed should consult with a well-regarded tax professional.
