Frequently Asked Tax Questions And Answers
Keyword: Schedule C or C-EZ
4.3 Interest/Dividends/Other Types of Income: 1099–MISC, Independent Contractors, and Self-employed
Your son may be liable to pay into the Social Security and Medicare system by paying self-employment tax. His employer should complete the other income box on Form 1099-MISC (PDF), Miscellaneous Income. Persons engaged in the trade or business of delivering or distributing newspapers or shopping news (including any services directly related to such delivery or distribution) are considered by statute as nonemployees and are treated as self-employed for all Federal tax purposes, including income and employment taxes. Self-employed persons report their income on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or you may qualify to use Form 1040, Schedule C-EZ (PDF), Net Profit from Business. See Form 1040, Schedule SE (PDF), Self-Employment Tax which must be filed if net earnings from self-employment are $400 or more.
References:
- Publication 15, Circular E, Employer's Tax Guide
- Publication 15-A (PDF) , Employer's Supplemental Tax Guide
Your self-employment income is reported on Form 1040, Schedule C (PDF), Profit or Loss from Business, or on Form 1040, Schedule C-EZ (PDF), Net Profit from Business.
Your Medicare and social security taxes are reported on Form 1040, Schedule SE (PDF), Self-Employment Tax.
As a self-employed person, you pay your Medicare and social security taxes the same way you pay your income taxes. If you expect to owe less than $1,000 in total taxes, you can pay them when you file your income tax return. If you expect to owe $1,000 or more in total taxes, you will need to make estimated tax payments. These payments are made quarterly using Form 1040-ES (PDF), Estimated Tax for Individuals. You will need to figure these taxes at the beginning of the year. To learn about figuring and making estimated tax payments, please refer to Publication 505, Tax Withholding and Estimated Tax.
If your sole proprietorship business is inactive during the full year, it is not necessary to file a Form 1040, Schedule C (PDF), Profit or Loss from Business, for that year.
References:
- Publication 334, Tax Guide for Small Business