by Laura Sullivanlyndall

Created on: January 10, 2011   Last Updated: January 22, 2011

Guide to Reporting Self Employment Income to the IRS

Everyone who has net income over $400 from self employment must report it to the IRS.  This may include income from farming, baby sitting, a partnership or any other type of business where you physically participate in the business and earn wages other than from an employer who pays you and deducts taxes from your paycheck. When doing business for your self tax issues can complicated, so it is always advisable to hire a tax professional at very least a full charge bookkeeper who can get the ball rolling and start reporting for you.

The first thing that needs to be done when reporting self employment income to the IRS, is to send in estimated taxes. By sending in estimated taxes you will avoid getting penalties associated with making too much and not paying taxes on that income according to the proper time table associated with the amount you make. Social security and Medicare taxes for a self employed person equal 15.3% of the net self employment income. The estimated taxes are due to the IRS qaurterly. If you do not make very much money from your self employment you may not be required to do this, but come tax time you will be penalized for under payment if you made too much and did pay your estimaded taxes. Therefore, it is best to send in estimated taxes just in case.

Estimated taxes are due by the 15th of the month after the ending qaurter. Therefore, estimated taxes are due by April 15th, July 15th, October 15th, and January 15th. If the 15th of these months falls on a weekend then the payments are due the following Monday. In addition, an additional amount of a minimal 10% of net self employment income should be sent in to cover federal withholding taxes on the self employment.

If you are self employed and pay someone to do work for you under your self employement business, you must also send in their social security and medicare taxes for the wages earned from you. If they make under six hundred dollars you do not have to do this, they can do it. However, after the six hundred dollar limit, you must send in 15.3% social security and medicare taxes for them. Half of this amount 7.65% comes out of your pocket, the other 7.65% comes out of their pocket. These payments should also be made on April 15th, July 15th, September 15th and January 15th. Note, that if you do hire others to work for you, this will make you an employer and you must file for EIN (Employer Identification Number).  

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