Self Employment Tax and Tax Payments,

Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners.

To be self-employed, an individual is normally highly skilled in a trade or has a niche product or service for their local community. With the creation of the Internet the ability for an individual to become self-employed has increased dramatically.

To be self-employed is not the same as being a business owner: A business owner is not required to be hands-on with the day-to-day operations of his or her company.

If you're in business for yourself, or carry on a trade or business as a sole proprietor or an independent contractor, you're considered self-employed.
Self-employed individuals are required to pay self-employment tax by filing Schedule SE along with Form 1040.

Estimated Tax
Estimated tax is the method used to pay tax on income that isn't subject to withholding. You generally have to make estimated tax payments if you expect to owe taxes, including self-employment tax of $1,000 or more, when you file your return. Use Form 1040-ES to figure and pay the tax.

If you are self-employed you must pay Estimated Taxes
This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you don’t make quarterly payments you can be penalized for underpayment at the end of the tax year.

IRS Publications and Forms for the Self-Employed
Your business costs are usually deductible if the business is operated to make a profit.

You may be able to deduct expenses on your home or car if you use them for business.

Deferring your income to the next year might be advantageous.

If you have employees, you must pay employment taxes, including federal income, Social Security and Medicare taxes.

You may need to pay excise taxes if you manufacture or sell certain products; operate certain kinds of businesses; use various kinds of equipment, facilities, or products; or receive payment for certain services.

For estimated tax purposes, the year is divided into 4 payment periods. Each period has a specific payment due date. If you don't pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you're due a refund when you file your income tax return.

Business Expenses
To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that's common and accepted in your trade or business. A necessary expense is one that's helpful and appropriate for your trade or business.

It's important to separate business operating expenses from expenses used to figure the cost of goods sold, capital expenses and personal expenses.

Business Use of Your Home or Car
If you use part of your home exclusively and regularly for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, real estate tax, rent, insurance, utilities, repairs and depreciation. You can even deduct the cost of your office furniture and equipment.

Income Deferral
If you're self-employed and use the cash basis of accounting (meaning all income is included in the year it's actually received), it may be advantageous for you to defer some of your income until the next year. For example:

Hiring the Family
If you have your own business, an income-splitting opportunity is to put your children on your payroll. What you pay them is a business deduction for you and earned income for them. You can do this only if they actually work for you, and you can't pay them more than their services are actually worth. In addition, the wages can be used as a basis for funding your children's IRA contributions, giving them a start on retirement.

H&R Block At Home® 2011 - 2012 [Formally TaxCut] Tax Preparation

Self Employment Tax