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When in doubt contacting a tax professional, Government tax specialist or tax help guides may be beneficial in gathering the appropriate information, minimizing tax paid and accurately filing taxes. A few tips about filing taxes as a sole proprietor are below, however these tips do not replace the advice of a tax professional.

*Gross Income: If gross income is below the minimum required for filing taxes with the IRS, a sole proprietor still has to file a tax return with the IRS if the business income is more than $400.00.

*Amendments: If self-filing and errors are realized on tax forms following submission of the original tax filing and amendment may be filed. An amendment can be sent to the IRS using a form 1040X.

*State Taxation: Taxation of sole proprietorships may vary from state to state. Some states may require separate reporting and/or taxation for income earned through a sole-proprietorship.

*Home office deductions: Making use of a designated home office may lower taxable business income through higher expenses. Paying bills during the tax year and keeping records of such bills can assist in recording and reporting of such expenses. An IRS form 8829 can be used to deduct such expenses.

*Non-Home office Expenses: If a sole proprietorship does not qualify for home office deductions, legitimate office expenses and supplies can be reported and deducted from total income on a schedule C.

*State and Federal Contacts: Contacting federal and state tax authorities with tax questions may be more cost effective than hiring a tax accountant or tax preparation professional.

SUMMARY:

Sole proprietorships are self managed businesses that are not classified as other types of businesses. Sole proprietors are directly responsible for actions, consequences and taxation of income earned through the proprietorship. Tax filing for a sole proprietorship makes use of a few additional forms but is less complicated than larger businesses in terms of tax reporting. Self-employment tax is a responsibility of sole proprietors and can add up to approximately 15.3% of total business income which cannot be reduced through standard deductions.

There are advantages and disadvantages to sole-proprietorships. An advantage is the income earned through such a business can be reduced through legitimate expensing such as home office deductions that are reported on IRS form 8829 and then transferred onto a schedule C and then onto a schedule SE in the case of home office deductions. Otherwise, expenses can be reported directly onto a schedule C. The tax rate for sole proprietorships is lower than the normal income tax rate for income between $30,650- $97,500. That is to say self-employment tax is a flat rate up to $97,500. Consequently, there are recognizable tax benefits of earning income through a sole-proprietorship.

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Sour ces:

http://www.irs.gov/busines ses/small/article/0,id=98202,0 0.html
http://www.irs.gov/pub/i rs-pdf/f1040sse.pdf
http://www. wwwebtax.com/income/sole_propr ietorships.htm
http://www.irs.g ov/pub/irs-pdf/p587.pdf
http:// www.irs.gov/pub/irs-pdf/f8829. pdf
http://sbinformation.about. com/cs/accounting/a/aa121502a. htm

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