You're the boss...

 

Self-employed individuals are their own bosses. They call the shots. Including, where, when and how to work. Generally, you are self-employed if any of the following apply to you:

• You carry on a trade or business as a sole proprietor or an independent contractor.

• You are a member of a partnership that carries on a trade or business.

• You are otherwise in business for yourself (including a part-time business)

 

As a self-employed individual, you are required to file an annual return and pay estimated tax quarterly.

 

Self-employed individuals must pay self-employment tax (SE tax) as well as income tax. SE tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. In general, anytime the wording "self-employment tax" is used, it only refers to Social Security and Medicare taxes and not any other tax (like income tax).

 

You have to file an income tax return if your net earnings from self-employment were $400 or more.

 

Hobby or Business?

 

First, you need to figure out if making art, music, widgets, dance is your hobby or your business.  That is, do you do it for pleasure, or to make a living? If it's a business, you can probably deduct the cost of your equipment and other expenses and fees on your tax return. If it's a hobby, you can only deduct only up to the amount of income you earned from the hobby.

 

If you have decided that yes, your art or your idea or your widget is indeed a business venture, you need to: 

 

• Make sure you are operating as a business.

• Keep good books and accurate records.

• Advertise.

• Get business cards.

• Get a business license or separate taxpayer ID number (TIN).

• Join professional organizations and/or union.

• Copyright your work.

• Contact TaxTeam415 to prepare your taxes.