Self Employed Tax Qs

Hulascoop · ‎June 8, 2022

I am newly self employed (independent contractor w/ LLC and 1099 Income). I have a couple of other side gigs that pay 1099s as well.

1. Do I need to keep my expenses/deductions separated for each different business?

2. Do I need to keep itemized receipts of each expense, or is it sufficient to put them on a business specific credit card?

3. How do I go about paying quarterly taxes if needed - and would I only need to do this if I am making a net profit (after deductions and contributions to IRA, etc.)

4. Can I deduct my healthcare expenses if I have a catastrophic plan through my state's health exchange, or is that only applicable for full-coverage policies?

5. If I primarily work from home, how much of my living expenses can I deduct?

Thank you!

SundayInSalem · ‎June 8, 2022

It depends. You can group income and expenses for similar businesses, but need to create separate businesses for different types of work. For example, you can’t group online sales with a plumbing business.

If you are audited, the IRS will want specific receipts. A business credit card statement will not show whether an expense is business related. For example, you might buy groceries and office supplies at Walmart. Similarly, you could buy a personal item, like a bottle of soda at Home Depot.

See What kind of records should I keep

You can make estimated payments online directly with the IRS or you can send payment vouchers. Income and self-employment tax is based on net profit. Business expenses count against net profit, but IRA contributions do not. They will reduce your overall income tax, but not self-employment tax.

See Estimated Taxes

Self-employed persons can deduct health insurance if you (or your spouse) are not covered by an employer plan.

See Deducting Health Insurance Premiums If You're Self-Employed

You cannot deduct living expenses. You may be able to claim a home office deduction.

See The Home Office Deduction

VolvoGirl · ‎June 8, 2022

What kind of LLC do you have? Is it a Single Member LLC? Is it a S Corp? If it is a Single Member LLC that is not a S Corp. it is a disregarded entity and you file it on Schedule C in your personal 1040 tax return. You might need to have separate Schedule Cs for different businesses.

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment. You pay 15.3% SE tax on 92.35% of your Net Profit greater than $400. The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare. So you get social security credit for it when you retire.

The SE tax is already included in your tax due or reduced your refund. It is on the 1040 Schedule 2 line 4 which goes to 1040 line 23. The SE tax is in addition to your regular income tax on the net profit.

Here is some IRS reading material……

IRS information on Self Employment

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center

Pulication 334, Tax Guide for Small Business

http://www.irs.gov/pub/irs-pdf/p334.pdf

Publication 535 Business Expenses

http://www.irs.gov/pub/irs-pdf/p535.pdf

Publication 463 Travel, Gift, and Car Expenses

https://www.irs.gov/pub/irs-pdf/p463.pdf

Publication 587 Business use of home

https://www.irs.gov/pub/irs-pdf/p587.pdf

What is Depreciation