The income you earn as an independent contractor generally will be considered income from self-employment and you will need to file Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or you may qualify to use Form 1040, Schedule C-EZ (PDF), Net Profit from Business. You will also need to file Form 1040, Schedule SE (PDF), Self-Employment Tax, if you had net earnings from self-employment of $400 or more.

References:

• Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship)
• Form 1040, Schedule C-EZ (PDF), Net Profit from Business
• Instructions for Form 1040, Schedule C
• Form 1040, Schedule SE (PDF), Self-Employment Tax
• Tax Information for Business

You are responsible for Federal income tax and self-employment taxes on your income as an independent contractor. Self-employment taxes are your contributions to Social Security and Medicare. Your self-employment income and expenses will be reported on Form 1040, Schedule C (PDF), Profit or Loss from Business, or you may qualify to use Form 1040, Schedule C-EZ (PDF), Net Profit from Business. You will also need to use Form 1040, Schedule SE (PDF), Self-Employment Tax, to compute and report your social security and Medicare tax, if you had net earnings from self-employment of $400 or more. Since there is no withholding on your self-employment income, you may need to make quarterly estimated tax payments. This is done using a Form 1040ES (PDF), Estimated Tax for Individuals.

References:

• Form 1040, Schedule C (PDF), Profit or Loss from Business
• Form 1040, Schedule C-EZ (PDF), Net Profit from Business
• Instructions for Form 1040, Schedule C
• Publication 334, Tax Guide for Small Business
• Form 1040, Schedule SE (PDF), Self-Employment Tax
• Form 1040ES (PDF), Estimated Tax for Individuals
• Tax Topic 355, Estimated Tax
• Tax Information for Business
• Publication 505,Tax Withholding and Estimated Tax

Self-employment tax is paid by making quarterly estimated tax payments which include both income tax and social security tax.

References:

• Publication 334, Tax Guide for Small Business
• Publication 505, Tax Withholding and Estimated Tax
• Publication 533, Self-Employment Tax

Independent contractor report their income on Form 1040, Schedule C (PDF), Profit or Loss from Business, or they may qualify to use Form 1040, Schedule C-EZ (PDF), Net Profit from Business. Independent contractors should also be aware of Form 1040, Schedule SE (PDF), Self-Employment Tax. This form is used to figure social security and Medicare tax which is based on self-employment income. Also, see Form 1040ES (PDF) Estimated Tax For Individuals, as you may need to make quarterly estimated tax payments.

References:

• Form 1040, Schedule C (PDF), Profit or Loss from Business
• Form 1040, Schedule C-EZ (PDF), Net Profit from Business
• Instructions for Form 1040, Schedule C
• Form 1040, Schedule SE (PDF), Self-Employment Tax
• Form 1040ES (PDF), Estimated Tax for Individuals
• Instructions for Form 1040, Schedule SE
• Publication 533, Self-Employment Tax
• Publication 334, Tax Guide for Small Business
• Tax Topic 554, Self-Employment Tax
• Publication 505, Tax Withholding and Estimated Tax
• Tax information for Business

Your self-employment income is reported on Form 1040, Schedule C (PDF), Profit or Loss from Business, or on Form 1040, Schedule C-EZ (PDF), Net Profit from Business.

Your Medicare and social security taxes are reported on Form 1040, Schedule SE (PDF), Self-Employment Tax.

As a self-employed person, you pay your Medicare and social security taxes the same way you pay your income taxes. If you expect to owe less than $1,000 in total taxes, you can pay them when you file your income tax return. If you expect to owe $1,000 or more in total taxes, you will need to make estimated tax payments. These payments are made quarterly using Form 1040ES (PDF), Estimated Tax for Individuals. You will need to figure these taxes at the beginning of the year. To learn about figuring and making estimated tax payments, please refer to Publication 505, Tax Withholding and Estimated Tax.

References:

• Form 1040, Schedule C (PDF), Profit or Loss from Business
• Form 1040, Schedule C-EZ (PDF), Net Profit from Business
• Form 1040, Schedule SE (PDF), Self-Employment Tax
• Tax Topic 554, Self-Employment Tax
• Publication 505, Tax Withholding and Estimated Tax
• Form 1040ES (PDF), Estimated Tax for Individuals

If you have $400 or more of net profit from your business, you will have to file a Form 1040 with a Form 1040, Schedule C (PDF), Profit and Loss from Business (Sole Proprietorship) or Form 1040, Schedule C-EZ (PDF), Net Profit form Business and Form 1040, Schedule SE (PDF), Self-employment Tax .

References:

• Publication 334, Tax Guide for Small Business
• Form 1040, Schedule C (PDF), Profit and Loss from Business (Sole Proprietorship
• Form 1040, Schedule SE (PDF), Self-employment Tax

The Federal Income Tax return is filed annually. As a self-employed individual, if after deducting withholding and credits you expect to owe $1,000.00 at the end of the year, you should make estimated tax payments on a quarterly basis. Form 1040ES (PDF) , Estimated Tax for Individuals , will assist you in determining if estimated tax payment are due and how they are paid.

When you file the income tax return at the end of the year, you include the income from the business on the return. The forms to be filed are Form 1040 (PDF), U.S. Individual Income Tax Return , Form 1040, Schedule C (PDF), Profit or Loss from Business Form 1040, Schedule SE (PDF), Self-Employment Tax . If estimated tax payments where made during the year, they will be claimed on the individual income tax return as payments. See the Form 1040, Line 62.

References:

• Form 1040ES (PDF), Estimated Tax for Individuals
• Form 1040 (PDF), U.S. Individual Income Tax Return
• Form 1040, Schedule C (PDF), Profit or Loss from Business
• Form 1040, Schedule C-EZ (PDF), Net Profit from Business
• Form 1040, Schedule SE (PDF), Self-employment Tax