If the taxpayer is a sole business owner or professional in their own practice, they are usually practicing as a sole proprietor. In this type of entity, you report business profit or loss on your personal tax return.
Pertinent data on Sole Proprietorships:
Nature of Owner's Income: Self-employment income
Federal Tax Filing Forms Used
Income Tax: Form 1040, Schedule C
Self-employment tax: Form 1040, Schedule SE
Estimated tax: 1040-ES
Employment taxes: 941 (943 for farmers), 940 or 940-EZ, and 8109.
Additional forms for excise taxes.
Compensation reported: Form 1040, Schedule CAdvantages:
Low cost to establish & run
Pension plan contributions before-tax (not included as income to owner)
Up to 70% of medical insurance deductible for owners
Limited human resources
Lack of continuation at owner's death
Unlimited liability from creditors and lawsuits
Small BusinessA sole proprietorship is an unincorporated business that has one owner who pays the taxes on the profits of that business.
Small BusinessFind out how becoming a corporation can protect and further your finances.
TaxesMost U.S. taxpayers will be familiar with the 1040. By the end of filling it out, you'll know how much tax you owe, or what your refund is.
TaxesUnderstand the tax implications of running a small business in California, and learn which state taxes apply based on business type.
Small BusinessLearn the differences between the types of business organizations so you can determine how to best structure your business for tax and liability limitations.
TaxesA tax return is the form or forms used to file income taxes with the IRS.
TaxesIf you're a small business owner, note these potential tax deductibles so that you don't pay taxes that could have been extra revenue in your account.
Personal FinanceFind out what information you need to pull together before filling out your return.
TaxesThe need for 1099 forms and why you must track the income reported on them. If you don't, the IRS will find it anyway and go after you – a costly mistake.