| Are you running a small business as a sole proprietor? | | | | Don't let the name of this form scare you. Depending |
| Are you confused about which tax forms you are | | | | on your situation, you may not have to touch |
| required to file? Here's an overview of the most | | | | deprecation or amortization with a ten-foot pole. If you |
| common forms you'll need to prepare this tax season. | | | | bought any business equipment during the year, and |
| 1. Schedule C, Profit or Loss From Business. | | | | you meet the requirements, you can deduct 100% of |
| Be sure you really are a sole proprietor before using | | | | the cost in the year of purchase rather than |
| this form. If your business entity is not a corporation or | | | | depreciating it over several years. See the form |
| a partnership, then your small business could be a sole | | | | instructions for details, or talk with your accountant |
| proprietorship. Other common synonyms for sole | | | | about Section 179, which allows virtually all sole |
| proprietor include independent contractor or | | | | proprietors to say goodbye to those complex |
| self-employed. | | | | depreciation rules. Even if you do qualify for the |
| Note: If your business entity is a limited liability company | | | | Section 179 deduction, you still have to complete Form |
| (LLC) and you are the only owner (aka "member" in | | | | 4562. The total expense from Form 4562 is reported |
| LLC lingo) of the LLC, you may be taxed like a sole | | | | on Schedule C, Line 13. |
| proprietorship. Any single-member LLC can also | | | | 3. Form 8829, Expenses for Business Use of Your |
| choose to be taxed like a corporation by filing Form | | | | Home. |
| 8832. If you haven't filed Form 8832 and told the IRS | | | | If you qualify, you can take a deduction for a home |
| you want to be taxed like a corporation, then by | | | | office. This is one of the best tax breaks available, |
| default you are considered a sole proprietor for tax | | | | because you are getting a business deduction for |
| purposes and should file Schedule C. | | | | money you would have spent anyway for things like |
| Schedule C is the form on which all the major income | | | | mortgage interest (or rent), property taxes, |
| and expense items for your sole proprietorship are | | | | homeowner's (or renter's) insurance, and utilities. So this |
| reported. This form also tells you the "bottom line" for | | | | is definitely worth looking into. The total expense from |
| the business. Line 31 shows whether you made a | | | | Form 8829 is transferred onto Schedule C, Line 30. |
| profit (and therefore have taxable income) or a loss | | | | 4. Schedule SE, Self-Employment Tax. |
| (which can typically be used to offset other sources | | | | If your business has a profit of $400 or more, you |
| of income). | | | | must calculate and pay self-employment tax on that |
| The amount from Line 31 is then transferred to Form | | | | profit via Schedule SE. Your self-employment tax is |
| 1040, Line 12, where it becomes part of the calculation | | | | then transferred from Schedule SE onto Form 1040, |
| for total personal income. | | | | where it is added to your federal income tax and |
| 2. Form 4562, Depreciation and Amortization. | | | | becomes part of your total federal tax liability. |