Can i file self employed on turbotax

TURBOTAX CUSTOMER REVIEWS

TurboTax Self-Employed Reviews

Perfect for personal and small business income and expenses, TurboTax Self-Employed searches for industry-specific deductions and covers industries like rideshare, independent contractor, online sales, person or professional services and more.

(4.8169/5 | 1819 reviews)

You’ve just stepped into the world of entrepreneurship. Whether you opened your own online boutique, began freelancing your graphic design skills, or drove for a ride-share company, you have a variety of tax implications to consider – and some of them can slim down your tax bill.

Before learning about the ins and outs of filing taxes as a self-employed individual, know that you don’t need to worry about remembering all of this come tax time. TurboTax Live Self-Employed tax experts are available via one-way-video with unlimited tax advice for your personal and business income and expenses, and can help you get industry specific tax deductions and credits you’re eligible for. You can even just fully hand over your taxes to a TurboTax Live tax expert who can do them from start to finish — all from the comfort of your home — with TurboTax Live Full Service.

Home Offices

Working from the comfort of your own home can help you maximize your tax write-offs. If you regularly and exclusively use a home office specifically for your business, you can claim the home office deduction related to that space.

Expenses that may be deducted as part of the home office deduction include a portion of home-related expenses like real estate taxes, mortgage interest, rent, utilities and insurance, based on the square footage of your home office space. You can also deduct the entire cost of repairs and painting needed for your home office.

Part Time Hires

Are your kids out on holiday or a school break? Hire them! Sole proprietors who hire their kids to run deliveries, clean the office, answer phones or enter data can deduct those wages on Schedule C, as long as the compensation is reasonable for the type of work performed. Wages paid to children are exempt from Social Security and Medicare taxes if they are under 18, and they are not subject to federal unemployment tax if they are under 21. It’s also likely that your child will not owe income taxes on these wages, which lowers your family’s overall tax bill considerably.

Retirement Planning

Save for the future and on your tax bill, all at once! Opening a retirement plan can help lower your taxable income. The most common for self-employed is a Simplified Employee Pension Plan (SEP). You can put in up to the lesser of 25 percent of your net earnings from self-employment or $58,000 for 2021 ($61,000 for 2022) up until the extended October 15 tax deadline if you filed an extension and lower your 2021 taxes. Compare that to the $6,000 cap on IRA contributions ($7,000 if 50 and over) for 2021 that have to be made by the April 18 extended tax deadline.

Mileage is Money

While employees of a regular nine-to-five job cannot deduct the cost of driving to and from work, you certainly can if you’re self-employed and driving to see a client, heading to a meeting, or going to work from another location.

You can claim 56 cents per mile for 2021, plus the cost of parking and any tolls you paid. Be sure to track your business mileage so that you have substantiation for your mileage deduction.

Business Trips

Tip for the traveling pros: If you’re flying to another U.S. city primarily for business, you can deduct 100 percent of the travel costs. Remember that while you are traveling, you can also expense your hotel or lodging and your meals, though this can only be deducted for the days you’re spending on business.

Under the Coronavirus Response and Relief Supplemental Appropriations Act passed on December 27, 2020, 100% of business meals (rather than the previous 50%) will be deductible beginning in tax year 2021 (the taxes you file in 2022) through tax year 2022 as long as the expense is for food or beverages provided by a restaurant.

While dealing with your business and personal life can be busy sometimes, knowing these simple tips can help you easily find business deductions that will lower your taxes and help you save money for your business. If you still have questions, you can connect live via one-way-video to a TurboTax Live Self-Employed tax expert, with an average of 12 years experience, to get your tax questions answered. TurboTax Live Self-Employed tax experts are available in English and Spanish, year round, and can even review, sign and file your tax return.

You can also use QuickBooks Self-Employed to track your income, expenses and mileage, and you can capture receipts year-round and then transfer your business information to your TurboTax Self-Employed tax return, making tax-time a breeze.

Updated for Tax Year 2021 • June 30, 2022 10:02 AM

Schedule C: Consider income, expenses and vehicle information

Each year, sole proprietors have the chore of preparing and filing Schedule C with their 1040 to show the IRS whether their business had a taxable profit or a deductible loss. Schedule C can seem daunting, but filing will be easier if you plan ahead and keep good records.

We've broken down the form into sections, so you can see what the IRS expects from you and what records you'll need at tax time.

In this section, you calculate your gross income.

Start by reporting gross receipts or sales for the year, including amounts reported on 1099 forms that  were issued by clients or others for whom you provided services.

Other types of income you must report include:

  • The value of goods or services you received through barter transactions
  • Bad debts you recovered if they were written off on prior-year tax returns
  • Interest on business bank accounts.

Total up these items and subtract your cost of goods sold (which is calculated in Part III and explained below) to arrive at gross income.

Part II: Expenses

This is where good record keeping can really save you money on your taxes. You can write off a wide variety of business expenses you paid during the year, including things like:

  • Advertising costs
  • Commissions
  • Supplies
  • Legal fees
  • Repairs and maintenance
  • office expenses

You can also deduct:

1. Car and truck expenses: You can report these costs in one of two ways: Enter your actual expenses—for gas, oil changes, repairs, insurance, etc.—if you have supporting documentation, or take the IRS standard mileage rate. The rate for 2021 is 56 cents per mile.  For the first half of 2022 the rate is 58.5 cents per mile and increases to 62.5 cents per mile for the last half of 2022.

2. Depreciation and Section 179 expense deduction: The law allows businesses to depreciate—or gradually deduct the cost of —assets such as equipment, fixtures, furniture, etc., that will last more than one year. For these assets, you first fill out Form 4562: Depreciation and Amortization, and enter the result on Schedule C.

You also use Form 4562 if you elect the Section 179 "expensing" deduction. Section 179 lets you deduct the full cost of assets (both new and used) in the year they are placed in service, subject to certain limits.

3. Bonus Depreciation: Bonus depreciation has been changed for qualified assets acquired and placed in service after September 27, 2017.  For qualified assets that were purchased new before September 28, 2017, the old rules of 50% bonus depreciation still apply. The new rules allow for 100% bonus "expensing" of assets that are new or used.

The percentage of bonus depreciation phases down in the year:

  • 2023 to 80%
  • 2024 to 60%
  • 2025 to 40%
  • 2026 to 20%.

After 2026 there is no further bonus depreciation. This bonus "expensing" should not be confused with expensing under Code Section 179 which has entirely separate rules, see above.

The 100% expensing is also available for certain productions, such as qualified film, television, and live staged performances, and certain fruit or nuts planted or grafted after September 27, 2017.

50% bonus first year depreciation can be elected over the 100% expensing for the first tax year ending after September 27, 2017.

4. Pension and profit-sharing plans: Only enter contributions you made for your employees on Schedule C. If you also made contributions for yourself, report those on your 1040.

5. Travel, meals and entertainment: For business travel, deductible expenses include:

  • Lodging
  • Transportation
  • Tips
  • Fax services
  • Internet connections
  • Some other incidental expenses

You'll see that travel is reported separately from business meals and entertainment:

  • For tax years prior to 2018, you can deduct only 50 percent of your allowable meals and entertainment expenses.
  • Beginning in 2018, generally, only meals are 50 percent deductible while entertainment is not deductible at all.
  • For tax years 2021 and 2022, there is an exception for qualified business meals provided by a restaurant. In these cases, the meals are 100 percent deductible.

6. Wages: This category may seem straightforward, but can be a little tricky if you produce and sell goods. You should report amounts paid to employees, such as bookkeepers, receptionists, salespeople, etc., here. However, If you have production workers, you'll report their wages as part of the cost of goods sold in Part III.

7. Expenses for business use of your home: You qualify for this deduction if you use part of your home regularly and exclusively for your business. To qualify, your home office must be:

  • Located in a separate area in your home where you don't mix business with other activities
  • Used for business on an ongoing basis, not just once in a while

You calculate the home office deduction first on Form 8829: Expenses for Business Use of Your Home and then enter the result here.

Once you've entered all your deductions, subtract them from your gross income to get your net Schedule C profit or loss. The net income amount is then transferred to your Form 1040.

Do you have a loss? Then you're not done, yet. You have to go through some additional steps in this section before transferring that loss to your 1040, because it may not be fully-deductible.

  • You must declare whether you're fully "at risk" for amounts invested in the business.
  • If you are, then you can go ahead and take the full write-off.
  • If not, you'll have to fill out Form 6198: At-Risk Limitations to determine if your deduction is limited.

This section is for any business that sells goods to customers, so skip Part III if you're in a service business—consultant, yoga teacher, software programmer, day care center owner, etc.

Start by reporting the value of your inventory at the beginning of the year. This amount is usually the same as what you reported for closing inventory on last year's Schedule C.

Next, report the following costs and add them to your beginning inventory:

  • Merchandise, but don't include the value of anything withdrawn from sale or for your personal use.
  • Wages paid to production workers, factory supervisors and the like, if you're in manufacturing or construction.
  • Expenses for supplies and other overhead.

From that total, subtract the value of your closing inventory. The result is your cost of goods sold. Enter that amount in Part I to reduce your gross income.

In this section, you give the IRS information about any vehicles for which you're deducting expenses in Part II. The IRS uses the answers in this section when reviewing your vehicle deduction to see if it seems legitimate. So it's important, for example, to be able to answer YES to the question about whether you have written documentation for your deduction. If you answer NO, don’t be surprised if the IRS asks you to justify the deduction.

If you have business costs that don't fit into the categories listed in Part II, detail and report the total of those expenses on the line for "Other Expenses" in Part V.

Examples of other possible business expenses include:

  • Membership dues for professional organizations
  • Subscriptions to business publications
  • Fees you paid to credit card companies for processing customer card transactions
  • Business-related gifts to suppliers, clients, contractors, etc.

TurboTax Self-Employed will ask you simple questions about your life and help you fill out all the right forms. Perfect for independent contractors and small businesses. We’ll search over 500 tax deductions to get you every dollar you deserve and help you uncover industry-specific deductions.

TurboTax Self-Employed searches over 500 tax deductions to get you every dollar you deserve.

Uncover industry-specific deductions, get unlimited tax advice, & an expert final review with TurboTax Live Self-Employed.