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Schedule C & Schedule SE

Question: I am self-employed as a sole proprietor. How do I report my income and how do I pay Medicare and social security taxes?

Answer:

  • Report your income and expenses from your sole proprietorship on Schedule C (Form 1040) (PDF), Profit or Loss from Business (Sole Proprietorship) or on Schedule C-EZ (Form 1040) (PDF), Net Profit from Business.
  • If the total of your net earnings from self-employment from all businesses is $400 or more, use Schedule SE (Form 1040) (PDF), Self-Employment Tax, to figure your net earnings from self-employment and tax owed.

The self-employment tax consists of the Old-Age, Survivors, and Disability Insurance (Social Security) and the Hospital Insurance (Medicare) taxes. The IRS will transmit the information from the Schedule SE to the Social Security Administration to figure your benefits under the social security system. See Publication 334, Tax Guide for Small Business.

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.


Category: Small Business, Self-Employed, Other Business
Subcategory: Schedule C & Schedule SE

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The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
SE:W:CAR:MP:T:T:SP
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Washington, DC 20224