IRS publication #974 Premium Tax Credits
Problems figuring your income and expenses mid year?
IRS Tax Tips for Self Employed
If you are self-employed, you normally carry on a trade or business. Sole proprietors and independent contractors are two types of self-employment. If this applies to you, there are a few basic things you should know about how your income affects your federal tax return. Here are six important tips from the IRS:
- SE Income. Self-employment can include income you received for part-time work. This is in addition to income from your regular job.
- Schedule C or C-EZ. You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040. You may use Schedule C-EZ if you had expenses less than $5,000 and meet certain other conditions. See the form instructions to find out if you can use the form.
- SE Tax. You may have to pay self-employment tax as well as income tax if you made a profit. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax. If you owe this tax, attach the schedule to your federal tax return.
- Estimated Tax. You may need to make estimated tax payments. Try IRS Direct Pay. People typically make these payments on income that is not subject to withholding. You usually pay estimated taxes in four annual installments. If you do not pay enough tax throughout the year, you may owe a penalty.
- Allowable Deductions. You can deduct expenses you paid to run your business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business.
- When to Deduct. In most cases, you can deduct expenses in the same year you paid, or incurred them. However, you must ‘capitalize’ some costs. This means you can deduct part of the cost over a number of years.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.
Additional IRS Resources:
- Form 1040-ES, Estimated Tax for Individuals
- Publication 505, Tax Withholding and Estimated Tax
- Publication 535, Business Expenses
IRS YouTube Videos:
How much subsidy to take?
Max Herr — When I work with a client who is self-employed and whose income is irregular/inconsistent from month-to-month, if he/she is eligible for any amount of premium tax credits, I first urge them to not take them in advance at all, if the premium for their chosen health plan is within their means to begin with.
If, however, they need the help from Uncle Sam to pay premiums, then I recommend that they accept no more than 50% – 75% of what CoveredCA estimates their monthly tax credits to be. By doing this, it gives breathing room to earn more money, and lessens the risk of having to repay any credits, or minimizes the amount of credits to be repaid.
If their income ends up as projected or less, then they will receive the balance of unused tax credits as a refund (or applied to any unpaid tax owed).
See our main page on the Self Employed Tax Credit Line 29 IRS §106.
Schedule C – Line 12 Biz Income or Loss, Line 29 Health Insurance Premiums, Line 37 Adjusted Gross Income, MAGI Income
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Car and Truck Expenses
Legal and Professional Fees
Travel and Meals
Business Use of Your Home
Other Expenses You Can Deduct
Expenses You Cannot Deduct
Turbo Tax Video How to Claim Tax Credit
What Is the Premium Tax Credit (PTC)?
Who Must File Form 8962
Who Can Take the PTC
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Individuals Not Lawfully Present in the United States Enrolled in a Qualified Health Plan
Determining the Premium for the Applicable Second Lowest Cost Silver Plan (SLCSP)
Allocating Policy Amounts for Individuals With No One in Their Tax Family
Allocation of Policy Amounts Among Three or More Taxpayers
Alternative Calculation for Year of Marriage
Self-Employed Health Insurance Deduction and PTC ...