The deadline is near and taxes are due. Every year during tax time there are often more questions than answers among tax payers. Everyone wants to know what deductions and exemptions they qualify for so that they don’t have to pay a lot of money to the government. One question that is asked concerns the issue of self-employment.
Am I considered self-employed? People have hobbies and leisure time activities that have made them money. Ebay is a popular way to make extra money by selling the things we have lying around the house. But, does that qualify me to be self-employed?
According to the IRS, a self-employed person is someone who is the sole owner of their business enterprise. It also includes independent contractors. Independent contractors sell goods and services to others but they are the ones who decide how to do that.
The term “self-employment” covers a variety of individuals. You don’t have to have a business name on file to be considered self-employed.
Your business as a freelancer whether it is writing, photography, or another enterprise may not necessarily require it. Online work with a service where you don’t need to advertise for yourself may not facilitate the need to think of a business name.
On the other hand, if you have drawn up the business cards and are handing them out like candy, you are the owner of a business. You have a name and a product that you want others to buy. The work that you do is client driven, but the control over how the work is completed is still in your hands.
Office space doesn’t dictate whether you are self-employed. Small business owners work from their homes out of one room. The trend is towards lower overhead to maximize the amount of profit and lower the cost it requires to get a new business off the ground. Catering businesses have been started out of home kitchens. Toy businesses can be started in your garage.
Having another job doesn’t affect self-employment status either. Working for someone else from nine to five Monday through Friday won’t keep the government from viewing your other money maker as a separate business. The business can be a part-time enterprise that you started to make extra money.
All of these people are considered self-employed individuals according to the federal government. Once it has been determined that you are self-employed, think about applying for a business license and making it official by registering the name of the business. Freelancers and other independent contractors are included in this group.
Self-employment distinctions are important for tax purposes. There are filing requirements for the self-employed and additional forms to use. No one wants their friendly business enterprise to run afoul of the law.
For more information on self-employment designations, visit http://www.irs.gov/businesses. They provide articles on all aspects of business from small home-based businesses to larger enterprises. Please seek professional or gov’t assistance when it comes to establishing or understanding your legal tax status and obligations. I am not a lawyer and therefore can not offer legal advice and the last thing any filer wants is to be audited by the IRS!
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