Can I give myself a w-2 if I am self employed or do I need to give myself a 1099 ?

[DS30]

Neither - If you are reporting your self-employment income on Schedule C as part of your personal Form 1040 filing, then you will not need to give yourself either a W-2 or a Form 1099-MISC. In this case, your taxable income is your self-employment income so any income of the self-employment business is considered your income.

Please refer to this IRS link for more information about Business Expenses

[dollarbill247]

Without a W-2 you are ineligible for any Self employed 401k program. 

[Carl]

@dollarbill247 while your response is correct, it can be misleading. It can lead one to believe they can't have a retirement account of any type. The fact is, someone self-employed who reports business income/expenses on SCH C can have an IRA.

[wadek1970]

I am confused by all these answers.  I am a sole proprietor DBA my own name. I do contract work for the IT field.  Occasionally I bring on a contractor to help me on big jobs and pay him so, I applied for and got an EIN.  But I also need to report those wages I pay from my pocket as a sole proprietor.   I want to be to be able to report my income as a W2 employee of my own company, so my entire EITC that is for my kid is not eaten up by self-employment taxes. So, again I set up and got BSO services online from the SSA to report wage statements. I got this by checking the box... "I am Self-Employed with an EIN and receive a W-2 under this EIN" Does this not suggest I can withhold my own taxes, pay them to the corresponding agencies and issue myself a W2? Thanks

[AliciaP1]

No, you cannot pay yourself payroll, issuing a W-2, and file your taxes as a sole proprietor.  A sole proprietor is required to pay self-employment tax (which is social security and medicare taxes) on the full profit of their business.  If you bring in an independent contractor and pay that person more than $600 in the year, you are required to file a Form 1099-NEC for that person.

There are other options for your business to help you reduce your tax liabilities from being self-employed so you may want to contact a tax professional in your area to advise you.

You can also see Small Business and Self-Employed Tax Center for more information.

@wadek1970

[VolvoGirl]

Sole proprietors cannot take a withdrawal or salary and include it as an expense on their tax return. As a sole proprietor, you are not an employee of the business. You don't pay yourself or enter a salary or withdrawal for yourself. All the business income and expenses are your personal income and expenses in the first place. You just fill out a Schedule C. The net profit or loss is your income.  If you have a net profit of $400 or more on schedule C you will pay SE self employment tax on it in addition to your regular income tax. It's all included on your personal 1040 form.  

(And if you paid yourself and deducted it as an expense then you would have to include it as income on the same tax return so it would be a wash.)

See Schedule C instructions page C-10 for line 26,  right above line 30, Do not include….amounts paid to yourself

http://www.irs.gov/pub/irs-pdf/i1040sc.pdf

Your net profit on Schedule C is your personal income and counts for the EIC.  Oh and you can get in trouble for not reporting your expenses to qualify for the EIC.