If you’re self-employed, tax time can be confusing. Filing a federal tax return doesn’t have to be difficult, and with a little bit of information, independent contractors and small business owners can easily file returns just like the rest of the taxpaying population. Understanding what classifies as income from self-employment, as well as your tax liability is key to making the filing process go smoothly. Follow these tips for easy tax filing.

Tips for the Self-Employed

Income from self-employment includes anything you made doing part time work as well as profits from your regular job. When filing a return, you are required to include a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business with your Form 1040.

If you have profited from work or your business, you may be subject to a self-employment tax, which includes Medicare and Social Security taxes. To determine the amount of the tax you have to pay, fie Schedule SE, Self-Employment Tax, with your regular return.

You can be charged penalty fees if you haven’t paid enough taxes, so it’s critical to keep records of all deductions and payments. You may be required to make tax payments, based on income that isn’t subject to withholding, to ensure you don’t get penalized.

Running your own business can get expensive, but luckily there are some costs that can be deducted. Most expenses can be deducted in full, however some require long-term deduction. This type of deduction is called “capitalization”, and requires you to deduct a percentage of the expense each year, for a specified number of years.

Any deductions must be deemed necessary, and can’t be uncommon. The expense must be typical to your industry, and required to help your business run smoothly and efficiently.