Taxes for self-Employment and regular employment are entered on the same final return.
There are many people in this country who work regular jobs and have a business or income generating activity on the side. For the business or income-generating activity, the individual is responsiible for filing and paying self-employment taxes. The actual process of doing so is rather easy--it's the keeping of accurate records and business information separate from personal that presents the challenge. All of the information for both your self-employed and non-self employed tax is recorded on the same tax return.
Instructions
1. Separate all the regular employment information. This will include all the personal data with Form W-2s, 1099s for interest and dividend income and 1098s for mortgage interest deductions. Regular employment wages will be found in box 2 of the Form W-2 and will go on the Form 1040 into box 7 labeled "Wages, Salaries, Tips, etc". If there is more than one W-2 or a spouse's information from regular employment it will be the total of all amounts from all box 2s going into box 7 of the 1040.
All other income information will be entered onto the first section of the 1040 labeled "Income" and will include interest, dividends, alimony and capital gains and distributions.
2. Gather the profit and loss statement and balance sheet from the self-employment accounting records. The profits and or losses for self-employment will be calculated on the Form 1040 Schedule C and attached to the 1040. The first part of the Schedule C is for Income. Line one is where the gross receipts or sales are entered, this should be found at the top of a profit and loss statement. On line 4 the Cost of Goods sold is subtracted from the sales which leaves the gross profit recorded on line 5. The expense section includes expenses from numerous categories that are paid out of typical business income. These include advertising, car expenses, professional services and supplies. The result will be either a profit or loss on line 31. This amount will be transferred to the Form 1040 on line 12 and to the From 1040 Schedule SE on line 2. The Schedule SE will help calculate the appropriate amount of self-employment taxes owed.
3. Complete the Schedule SE. If the number at the bottom of the Schedule C is a positive number, that will be the business' profits. This profit amount will be entered on line 2 of the Schedule SE. If the profit is less than $400, there is no need to file SE as you will owe no tax on such a small amount. If it is larger, then multiply the profit by .9235 and enter the result on line 4. If the result on line 4 is $106,800 or less, multiply line 4 by 15.3 percent. If the result is larger than $106,800 multiply by 2.9 percent and add $13,243 to the total. This amount is then entered onto line 5 of the Schedule SE, and on line 56 of the 1040.
4. Add up all personal deductions for the "Tax and Credits" section of the 1040. This section of the 1040 includes lines 38 through 60. Line 38 is the adjusted gross income from the first page of the 1040. The purpose of this section of the 1040 is to reduce the amount of taxable income. It is here that the itemized deductions are entered. Line 55 is the amount of total tax owed after all deductions and credits have been taken.
The last section of the 1040 adds up all tax payments already made (through with-holdings and more)and calculates either a refund due or tax owed.
