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Tax obligations, deductions await if you're working for yourself

Published April 10, 2013 12:54 pm

Personal finance • The self-employed, contractors need to gives selves time for paperwork.
This is an archived article that was published on sltrib.com in 2013, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

The Tribune is providing down-the-stretch tips and reminders to help you complete the right forms, apply for all the deductions and credits you can, and get your tax filings in on time by April 15.

Countdown Tip No. 5: Tips for the self-employed.

Being your own boss can be liberating and lucrative, but it can also be confusing when it comes to taxes.

If you own a business or are an independent contractor, you'll probably have to pay self-employment tax on top of your income tax. The self-employment tax covers Social Security and Medicare taxes, items that an employer would normally withhold from your paycheck if you worked for a company. Income tax is due if your net earnings from self-employment totaled $400 or more in 2012, so the self-employment tax applies to part-time workers, too.

Use Schedule SE to pay the self-employment tax. Use Schedule C to report income as a sole proprietor.

You also may have to pay estimated taxes —the tax on income such as interest, rents or royalties, which can be paid in quarterly chunks. You can use Form 1040-ES to figure out your estimated tax.

As a self-employed person, don't forget that you can deduct some of the costs associated with running your company, such as mileage, product freight costs, start-up costs and machinery.

You may also qualify for a health insurance deduction to cover medical, dental or long-term care insurance premiums for yourself, spouse and dependents, including children under age 27, even if they are no longer a dependent.

More information about the self-employment tax, permitted business deductions and estimated taxes is available online at IRS.gov.

Coming up tomorrow: Watch out for fees when paying taxes by credit card.


Twitter: @jnpearce —

Countdown to April 15 — last-minute tips

Haven't filed your taxes yet? Check out The Tribune's Countdown to Tax Day series with information that can help as the deadline approaches:

April 4 • Where to get free help

April 5 • How to avoid tax scams

April 6 • The joys of filing electronically

Sunday • What's the Earned Income Tax Credit?

Tuesday • Don't miss out on the Child and Dependent Care Credit

Today • Understand your taxes if you're self-employed

Thursday • Watch out for fees when paying taxes by credit card

Friday • Reduce your taxes by saving for retirement

Saturday • Use the Taxpayer Advocate when tackling the IRS

April 14 • Don't ignore your taxes; file an extension to get more time






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