Self-employed people use Form 1040 Schedule C or C-EZ to report their profits or losses as sole proprietors or businesses, states the Internal Revenue Service. They use Form 1040-ES to figure the self-employment tax they owe and the vouchers attached to the form to send quarterly payments. If self-employed people make or receive payments during the tax year, they may need to file an information return, such as a Form 1099.Continue Reading
Self-employed people only need to file tax returns on their self-employment earnings if their net income is at least $400, although they may need to file a return on income from other sources, explains the IRS. They can use Schedule C-EZ if their business expenses total $5,000 or less as of 2015. To calculate net profit or loss, self-employed people subtract their business expenses from their total profit. These expenses may include advertising, office equipment, accounting, insurance and legal fees, points out About.com. Some businesses may also include interest on debts, travel and entertainment, and the use of vehicles for company needs.
Because self-employed people have no employer withholding taxes, they must make quarterly estimated payments for income tax and self-employment tax, which is Medicare and Social Security taxes for the self-employed, according to the IRS. They fill out the worksheet on Form 1040-ES with information from the prior year's tax return to calculate the amount of tax they must pay each quarter. If their income changes and they estimated earnings too low or too high, they use another Form 1040-ES to recalculate the next quarterly payment.Learn more about Income Tax