For those business owners who still haven’t filed your taxes and might be looking at filing an extension at this point, I though I’d ask a professional for some quick tips for you. The following information comes from Ruth McKenzie of Unicorn Unlimited in Detroit. She shared some quick info on forms, expenses and self employment tax. Remember to get your files in order so that when tax season comes around again, you’re ready and not scrambling!
SMALL BUSINESS TAX INFORMATION
If you are a sole proprietor or are the single member in an LLC you will need to file the following forms to report income and taxes for your business:
Form 1040 U.S. Individual Income Tax Return
Schedule C or C-EZ (Form 1040) Profit or Loss From Business
Schedule SE (Form 1040) Self-Employment Tax
DEDUCTIONS ALLOWED ON SCHEDULE C or C-EZ
Be smart about the deductions you claim…
Car and Truck Expenses
- Standard mileage rate for Business miles: 55 cents per mile.
- (You must choose between taking the standard mileage rate or actual expenses for your vehicle. If the vehicle is a lease you must use whichever method chosen during the first year for the entire lease period. If you use the standard mileage rate parking fees and tolls cannot be deducted.)
Legal and Professional Fees
- The cost of tax return preparation can be deducted on Schedule C
If you operate your business from home, make sure you know how to claim the deduction properly on form 8829…
Form 8829 Expenses for Business Use of the Home can be used to deduct expenses associated with the use of your home office. In order to claim this deduction, the space must be used exclusively and regularly for business. This deduction is also available for use of a structure that is not attached to the home such as a garage.
SELF EMPLOYMENT TAX ON SCHEDULE SE
- Net earnings from self employment of $400 or more are subject to SE Tax.
- SE tax rate is 15.3% of net earnings. (12.4% social security tax plus 2.9% Medicare tax)
- Fees you receive for services are reported on Schedule C or C-EZ but are not subject to SE tax.
My thanks to Ruth for her input for this post! If you have questions or happen to be in the market for an accountant, I encourage you to contact her.
Ruth McKenzie, Unicorn Unlimited Phone 313.931.1721 email rmckenzie2@email.com