What are the steps to take to file Income Tax for self-employed online contractor?

Question

I earn my income by doing graphic designing jobs from the internet.. I also pay designers who live in other countries..

I would appreciate to know of the steps I take how to file income tax with my situation

Answer 1

You file a Form 1040. Attach Schedule C to account for your business income and expenses.

Keep very careful records of the payments to the overseas designers as you won't be able to file 1099s for them since they don't have or need Social Security or Taxpayer Identification Numbers and can't be compelled to get them. It is a legitimate business expense if you can prove that it was actually paid, however.

Once you figure your net profit on Schedule C, complete Schedule SE to compute your Self Employment tax -- 15.3% of net profits.

Transfer the income from Schedule C and the SE tax from Schedule SE to the 1040 and complete your return in the normal manner.

If you owe any tax when done, there may be a penalty if you did not make quarterly estimated tax payments throughout the year. To avoid that penalty in the future, start making those estimated payments on Form 1040ES.

Until you get up to speed, you might seriously consider consulting with a CPA on your tax and business matters. I don't recommend the storefront tax prep mills (Block, Hewitt, etc.) in this case since you will need to regularly review your estimated payments to ensure that you are paying in enough. Many of those operations close up shop until the next tax season and won't be around when you need them during the year.

Answer 2

On your 1040 use Schedule C to compute net income - fees paid to others can be deducted there. Also use Schedule SE for self employed social security tax. That is it.

Answer 3

1. pick up the phone
2. call H&R Block

Answer 4

turbo tax or irs or expresstaxrefund.com