Nicole, Here Are Your Articles for Monday, November 09, 2020
Is this email not displaying correctly?
View it in your browser .
Our Website Contact Us About Us Services Tutorials Acumatica
Share Save

Filing Responsibilities With Income or Loss From Business

 

Even if you're doing a little freelance work from a home office, you're technically running a business and have some new tax responsibilities that you didn't have working entirely for wages. One of those requirements is filing Schedule C, which is used to report income or loss from a business you operated as a sole proprietor. An activity qualifies as a business if your primary purpose for engaging is for income or profit and you're involved with continuity and regularity.

A sole proprietorship is the simplest form for running a business, and is appropriate for many freelancers — those working in the gig economy. Your main filing requirement is Schedule C, part of the Form 1040 you would likely be filing anyway. Although the form may change from year to year, and tax laws and regulations also change, it's essential you keep exact records of money you earn and money you spend, because Schedule C has a lot of data requirements, as noted below:

Part I: Income. You enter, among other figures, gross receipts and sales, to calculate your gross income.

Part II: Expenses. These include everything from advertising to car use, and from relevant mortgage expenses to travel. You'll see about 20 categories here. Using numbers from Part I, you'll calculate whether you have a profit or loss.

Parts III-V: Cost of Goods Sold, Vehicle, and Other Expenses. As the IRS notes, "if you engaged in a trade or business in which the production, purchase, or sale of merchandise was an income-producing factor, you must take inventories into account at the beginning and end of your tax year." These sections may not be necessary for all taxpayers, but for those who have to fill these out, it can get complicated.

Getting ready for tax time

When it's time to make your annual visit to your accountant, there are a number of tasks you can do in advance to make sure preparing Schedule C goes as smoothly as possible:

  • Take stock of your workspace in your home. Home office deductions are complicated and strictly limited, but by keeping track of the space you use for work, you can help ensure you get the deduction.
  • List, by category, your expenses.
  • Keep a record of your income. If you have multiple clients and customers, take advantage of a simple invoicing program, which can give you a yearly total in a clean format.
  • Pay quarterly estimated taxes as necessary. This may depend on how much you're earning. Talk to your accountant about whether you need to be making quarterly payments, and how much they need to be.

Have you recently started a business? Give us a call and we'll help you prepare for tax filings to make sure you're all set for the April 15 deadline.

 
Share Save

Your Comments

Siegel Solutions Inc
Siegel Solutions Inc
(781) 487-7000
info@siegelsolutions.com
144 Gould Street Suite 205
Needham, MA 02494
Friend Me on Facebook
Follow Me on Twitter
Connect with me on LinkedIn
Saved Articles
Comments and Feedback
Refer A Friend
Your Privacy
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
Powered by
Copyright © IndustryNewsletters All rights reserved.

This email was sent to: ncormierdesign@gmail.com

Mailing address: 144 Gould Street Suite 205, Needham, MA 02494