If your business is organized as a sole proprietorship for taxes, you report all business income or losses on your individual income tax return. The business income or loss that you earn isn't taxed separately from your other income. This income “passes-through” to your personal income tax return because the business profits don’t get taxed as a separate entity.
Most often, you report your business income and expenses on Schedule C of Form 1040. If you have multiple unrelated businesses organized as sole proprietorships, you generally should prepare separate Schedule C forms for each to report your business income or losses. Separate Schedule C forms are typically filed for each spouse that has their own business as well.
The results of the various businesses are combined on your Form 1040 and added to your other income in determining your taxable income. In addition to paying income tax on your sole proprietorship business, you will also need to pay self-employment taxes including Social Security and Medicare taxes. These taxes are calculated using Schedule SE with your Form 1040 tax return. If you have multiple sole proprietorship businesses, you typically combine the results of these into a single amount that you then use with your Schedule SE. As with the Schedule C, if spouses have separate sole-proprietorship businesses, each spouse will prepare their own Schedule SE since self-employment taxes are calculated separately for each worker.
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