Self-employment on tax forms
When a person files a federal tax return that reflects his or her self-employment income and there has not been a substantial change, use it and any attachments to calculate the person’s self-employment income. The following chart shows which forms and lines to use based on the business’s ownership structure.
Where to find self-employment income on a tax return? (Effective September 16, 2019)
|Ownership Structure||Advantages||Tax Forms||Where to look for gross self-employment income?|
|Sole Proprietorships or Contract Employees|| A single person operates a business and is fully responsible for all losses and receives all profits.
There are not any special forms or rules to establish this type of business.
| The client files a 1040 with a Schedule C.||Use the gross income on line 3 of the Schedule C.|
|Partnerships||Two or more persons agree to conduct a trade or business.
Members share profits and losses.
Each partner pays taxes individually. The IRS does not tax the partnership.
Partnership files an informational return with the IRS.
|The partnership files a Form 1065 and supplies the client with a Schedule K-1.
The partner (client) files a 1040 and Schedule E for income tax or Schedule SE for self-employment tax.
|Determine if the client is a general or limited partner. This information is on line G of the Schedule K-1.
For a general partner, add the totals on lines 1, 4, and 14c to determine the amount of self-employment income.
For a limited partner, add lines 4 and 14C to determine the amount of self-employment income. The amount on line 1 is unearned income for a limited partner.
|S corporations||S corporations avoid most corporate taxes because corporate income, losses, deductions, and credits pass to their shareholders for federal tax purposes.
The corporation files an informational return with the IRS.
| The corporation files Form 1120-S and supplies a Schedule K-1 to the shareholder (client).
The shareholder (client) files a 1040 and a Schedule E that reference the K-1.
| Persons who have an interest in a corporation do not qualify for the business expense deduction.
Use the gross income on line 1 of the client’s schedule K-1 for profit sharing income. This is unearned income.
|Limited Liability Company||The IRS does not recognize limited liability companies. The IRS categorizes a LLC as sole proprietorship, a partnership, or corporation.||Check to see which IRS tax return the client completes. Treat the LLC as a sole proprietorship, a partnership, or corporation based on how the business filed its federal taxes.|