Rev. date: 12/21/2012
You are a sole proprietor if you are the sole owner of a business that is not a
corporation:
- Report your income and expenses from your sole proprietorship on
Schedule C (Form 1040) (PDF),
Profit or Loss from Business (Sole Proprietorship) or on
Schedule C-EZ (Form 1040) (PDF),
Net Profit from Business.
- If the total of your net earnings from self-employment from all businesses is $400 or more, use
Schedule SE (Form 1040) (PDF),
Self-Employment Tax to figure your net earnings from self-employment and tax
owed.
The self-employment tax consists of the Old-Age, Survivors, and Disability Insurance (Social Security) and the Hospital Insurance (Medicare) taxes. The IRS will transmit the information from the Schedule SE to the Social Security Administration to figure your benefits under the social security system. See
Publication 334,
Tax Guide for Small Business.
Note:
The federal tax system is based on a pay-as-you-go plan. Tax is generally
withheld from employees' wages or salary before they get it. However, tax is
generally not withheld from self-employment income. Thus, you may be required to
make estimated tax payments.
Publication 505,
Tax Withholding and Estimated Tax, provides information on making estimated tax payments.
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