Self Employment Income


C

c_shah

I have a self employment income of about $4500 for the year 2010.

I know I will have to pay FICA taxes and it would be about 15% of the
income about $700
Do I have to pay any income taxes , Filing status is married and one
dependent child?

Also, what forms I needed (I think 1040 SE but not sure)
 
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A

Arthur Kamlet

I have a self employment income of about $4500 for the year 2010.

I know I will have to pay FICA taxes and it would be about 15% of the
income about $700
Do I have to pay any income taxes , Filing status is married and one
dependent child?
Your are correct in that you will pay Self Employment tax.


I assume your expenses are 700 so you expect a profit of 4500-700?


You will file Form 1040 Schedules C (or if you can us it, C-EZ) and
SE. The SE is where your SE tax is calculated, and it will be
just over 14.1% of your "profit." Half of your SE tax is also
used to reduce your Adjusted Gross Income.


As for income tax, yes, that 3800 profit becomes income on form
1040 line 12. So it gets an income tax applied, separate from SE
tax.

IRS Publication 334 is for small business owners and has more than
you probably want to know.
 
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G

Gene E. Utterback, EA, RFC, ABA

c_shah said:
I have a self employment income of about $4500 for the year 2010.

I know I will have to pay FICA taxes and it would be about 15% of the
income about $700
Do I have to pay any income taxes , Filing status is married and one
dependent child?

Also, what forms I needed (I think 1040 SE but not sure)
I am assuming that your reference to $700 is about what you think the self
employment tax will be.

If your NET INCOME, after deductible expenses, is about $4,500 then your
self employment tax MAY be about $700. BUT there are a lot of variables
that you haven't touched on. Do you have other income - if you also worked
a day job and your W-2 earnings hit the FICA cap then you'd only owe
Medicare tax and NOT the full FICA tax on the self employment income. This
would mean you'd only be on the hook for about 3% in SE tax instead of
15.3%.

Whether you'll also have to pay income tax is another question. You say
you're married with one child. Without sounding like an A**, how on earth
does a family live on $4,500 a year? It costs more than that just to eat!

As a married person you'll likely file a JOINT return with your spouse.
You'll need to combined your incomes to figure your overall tax burden. You
could file separately, but NOT as single and if you lived together NOT as
Head of Household either. If you do file separately your tax brackets will
be different and you'll have to decide who gets to claim the kid.

You may need the help of a tax pro this year. Self employment is a great
thing, I'm a big fan and promoter of it. BUT it needs to be addressed
properly. If $4,500 is all of your gross income and you overlook some
deductible expenses you could easily pay more in tax that it would cost you
to have the return correctly.

Good luck,
Gene E. Utterback, EA, RFC, ABA
 

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