Rev. date: 1/1/2011You are a sole proprietor if you are the sole owner of a business
that is not a corporation:
Note: The Federal tax system is based on a pay-as-you-go plan.
Tax is generally withheld from employees' wages or salary before they get it.
However, tax is generally not withheld from self-employment income. Thus, you
may be required to make estimated tax payments.
Publication 505,
Tax Withholding and Estimated Tax, provides information on making estimated tax payments.
Rev. date: 1/1/2011If payment for services you provided is listed in box 7 of
Form 1099-MISC
(PDF), you are being treated as a self-employed worker, also referred to as
an independent contractor:
-
You do not necessarily have to "have a business," but simply
perform services as a non-employee to have your compensation treated this way.
-
The payer has determined that an employer-employee relationship
does not exist in your case.
-
That determination is complex, but is essentially made by
examining the right to control how, when, and where you perform those services.
-
It is not based on how you are paid, how often you are paid,
nor whether you work part-time or full-time.
There are three basic areas that are relevant to determine employment
status:
For more information on employer-employee relationships, refer
to Chapter 2 of
Publication 15,
Circular E, Employer's Tax Guide and Chapter 2 of
Publication 15-A (PDF),
Employer's Supplemental Tax Guide.
If you think that you were, or are, an employee and you would
like the IRS to issue a determination, you may submit
Form SS-8 (PDF),
Determination of Worker Status for Purposes of Federal Employment
Taxes and Income Tax Withholding.
Unless you think you were an employee, you report your non-employee
compensation on
Form 1040, Schedule C (PDF),
Profit or Loss from Business (Sole Proprietorship), or
Form 1040, Schedule C-EZ (PDF),
Net Profit from Business:
-
You also need to complete
Form 1040, Schedule SE (PDF),
Self-Employment Tax, and pay self-employment tax on your net earnings from self-employment,
if you had net earnings from self-employment of $400 or more.
-
This is the manner by which self-employed persons pay into
the Social Security and Medicare trust funds. Employees pay into the Social
Security and Medicare trust funds, as well as income tax withholding, through
deductions from their paychecks.
-
Generally, there is no tax withholding on self-employment
income.
-
You may be subject to the requirement to make quarterly estimated
tax payments.
-
If you did not make estimated tax payments, you may be charged
a penalty for underpayment of estimated tax penalty.
Rev. date: 1/1/2011Your son may be liable to pay into the Social Security and Medicare
system by paying self-employment tax:
Persons engaged in the trade or business of delivering or distributing
newspapers or shopping news (including any services directly related to such
delivery or distribution), where substantially all of the pay for these services
directly relates to sales or other output rather than to the number of hours
worked, and the person performs the delivery services under a written contract
between the person and the service recipient that states that the person will
not be treated as an employee for federal tax purposes, are considered by
statute as nonemployees and are treated as self-employed regardless of age for
all Federal tax purposes, including income and employment taxes.
-
His employer should complete the Nonemployee compensation
Box 7 on
Form 1099-MISC (PDF),
Miscellaneous Income. - Self-employed persons report their income on
Form 1040, Schedule C (PDF),
Profit or Loss from Business (Sole Proprietorship), or the person may qualify to use
Form 1040, Schedule C-EZ (PDF),
Net Profit from Business.
- See
Form 1040, Schedule SE (PDF),
Self-Employment Tax,
which must be filed if net earnings from self-employment are $400 or more.
- However, if the person does not meet all of the above stated
requirements, then if he is 18 years of age or older, his pay generally is
subject to social security and Medicare tax withholding. If the person is
under age 18, then he is generally exempt from social security and Medicare
tax.
Rev. date: 1/1/2011If you receive an award is listed on a Form 1099-Misc, box-3
other income for $4725.00 with no withholding, than this is reported on line 21
for Other Income on the Form 1040.
-
As with many foundations of this nature, tax information can
be found on the website for the organization.
-
Visit to website for the foundation for information on their
programs and assistance with this issue.
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