J.K. Lasser's Guide to Self-Employment: Taxes, Tips, and Money-Saving Strategies for Schedule C Filers

CHAPTER 1

Being Self-Employed and On Your Own

What Does Self-Employment Mean?

Legal Consequences of Self-Employment

Practical Issues in Self-Employment

Tax Terminology

Being 1099ed

What's Ahead

Being self-employed is an awesome thing. You control your destiny and your earning potential is limitless. Of course, you have many obligations that come along with being self-employed. Whether your business makes or loses money, you have to report your income and expenses to the federal government if you are otherwise required to file a tax return. Depending on the state you reside in, you'll also have to report your business activities to your state.

In order to report your income and expenses, you need to understand how being self-employed affects your taxes. If you are just starting out in business and formerly were an employee, things are very different as a self-employed individual. Instead of receiving a W-2 from your employer telling you exactly what you must report as income for the year, it's now up to you to track what flows in and out of your business coffers so you can report this at tax time. You may receive 1099s from businesses for which you perform services, but these forms may not tell the whole story of your revenue for the year.

You also must become familiar with tax terminology and rules that affect your tax responsibilities. And you should think about matters beyond taxes that become your responsibility as a business owner, including your health coverage (Chapter ...