Believe it or not, the IRS wants to help educate new self-employed small business owners about federal tax responsibilities and about filing Schedule C, Profit or Loss from Business. And this may just be a good refresher for some veteran small business owners too. The year long education process kicks off on May 21 with a free national phone forum that anyone can attend.
“One of the biggest challenges faced by people starting out in business is understanding and meeting their tax filing requirements,” said Kathy Petronchak, commissioner of the IRS’s Small Business/Self-Employed operating division. “It’s a new, different and potentially overwhelming experience for them. We want new small business owners to know that the IRS has resources to help them learn about their federal tax responsibilities and avoid common pitfalls.”
The campaign will provide new Schedule C, Profit or Loss from Business, filers with improved and updated educational materials through a variety of channels, including IRS.gov, small business workshops and other outreach events.
Schedule C is filed by sole proprietors (one-owner businesses) as an attachment to their Form 1040 individual income tax return. Self-employed individuals with less complex situations – including business expenses of less than $5,000, no net losses and no employees – may be able to file Schedule C-EZ, Net Profit for Business.
About one in seven federal income tax returns includes a Schedule C or Schedule C-EZ. Taxpayers filed over 21 million Schedules C for tax year 2006, reporting overall net profits from sole proprietorships totaling more than $269 billion.
In this introductory phase of the campaign, IRS is offering some basic tips to avoid potential problems:
- Classify workers properly as employees or independent contractors as determined by law, not the choice of the worker or business owner;
- Deposit federal employment taxes, called trust fund taxes, according to the appropriate schedule;
- Start making quarterly estimated quarterly payments to cover your own income tax and social security self-employment tax liability;
- Keep good records to protect your personal and financial investment and to make tax filing easier;
- Consider a tax professional to help you with Schedule C;
- File and pay your taxes electronically; it’s fast, easy, and secure;
- Protect financial and tax records to ensure business continuity in the event of a disaster; and
- Avoid abusive tax avoidance schemes such as the IRS’s 2008 – Dirty Dozen.”
The first event in the campaign is a free national phone forum, “Calling All First Time Schedule C Filers,” on May 21. It will focus on common pitfalls for new small businesses to avoid.
And while you’re waiting for May 21 to arrive, sign up to get the latest information about other events and learn about new products and services as they become available, by subscribing to e-News for Small Businesses; just type in your e-mail address and submit.