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140ez140ez Publication 334 - Introductory Material Table of Contents IntroductionOrdering forms and publications. 140ez Tax questions. 140ez Future Developments What's New for 2013 What's New for 2014 Reminders Photographs of Missing Children Introduction The purpose of this publication is to provide general information about the federal tax laws that apply to small business owners who are sole proprietors and to statutory employees. 140ez This publication has information on business income, expenses, and tax credits that may help you file your income tax return. 140ez Are you self-employed? You are self-employed if you carry on a trade or business as a sole proprietor or an independent contractor. 140ez Sole proprietor. 140ez A sole proprietor is someone who owns an unincorporated business by himself or herself. 140ez However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation. 140ez Trade or business. 140ez A trade or business is generally an activity carried on to make a profit. 140ez The facts and circumstances of each case determine whether or not an activity is a trade or business. 140ez You do not need to actually make a profit to be in a trade or business as long as you have a profit motive. 140ez You do need to make ongoing efforts to further the interests of your business. 140ez You do not have to carry on regular full-time business activities to be self-employed. 140ez Having a part-time business in addition to your regular job or business may be self-employment. 140ez Independent contractor. 140ez People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. 140ez However, whether they are independent contractors or employees depends on the facts in each case. 140ez The general rule is that an individual is an independent contractor if the payer has the right to control or to direct only the result of the work and not how it will be done. 140ez The earnings of a person who is working as an independent contractor are subject to self-employment tax. 140ez For more information on determining whether you are an employee or independent contractor, see Publication 15-A, Employer's Supplemental Tax Guide. 140ez Statutory employee. 140ez A statutory employee has a checkmark in box 13 of his or her Form W-2, Wage and Tax Statement. 140ez Statutory employees use Schedule C or C-EZ to report their wages and expenses. 140ez Limited liability company (LLC). 140ez A limited liability company (LLC) is an entity formed under state law by filing articles of organization. 140ez Generally, a single-member LLC is disregarded as an entity separate from its owner and reports its income and deductions on its owner's federal income tax return. 140ez An owner who is an individual may use Schedule C or C-EZ. 140ez Business owned and operated by spouses. 140ez If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. 140ez Do not use Schedule C or C-EZ. 140ez Instead, file Form 1065, U. 140ez S. 140ez Return of Partnership Income. 140ez For more information, see Publication 541, Partnerships. 140ez Exception—Community income. 140ez If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. 140ez S. 140ez possession, you can treat the business either as a sole proprietorship or a partnership. 140ez The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 140ez A change in your reporting position will be treated as a conversion of the entity. 140ez Exception—Qualified joint venture. 140ez If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. 140ez Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. 140ez For an explanation of "material participation," see the Instructions for Schedule C, line G. 140ez To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. 140ez Each of you must file a separate Schedule C or C-EZ and a separate Schedule SE. 140ez For more information, see Qualified Joint Ventures in the Instructions for Schedule SE. 140ez This publication does not cover the topics listed in the following table. 140ez IF you need information about: THEN you should see: Corporations Publication 542 Farming Publication 225 Fishermen (Capital Construction Fund) Publication 595 Partnerships Publication 541 Passive activities Publication 925 Recordkeeping Publication 583 Rental Publication 527 S corporations Instructions for Form 1120S What you need to know. 140ez Table A provides a list of questions you need to answer to help you meet your federal tax obligations. 140ez After each question is the location in this publication where you will find the related discussion. 140ez Table A. 140ez What You Need To Know About Federal Taxes (Note. 140ez The following is a list of questions you may need to answer so you can fill out your federal income tax return. 140ez Chapters are given to help you find the related discussion in this publication. 140ez ) What must I know Where to find the answer What kinds of federal taxes do I have to pay? How do I pay them? See chapter 1. 140ez What forms must I file? See chapter 1. 140ez What must I do if I have employees? See Employment Taxes in chapter 1. 140ez Do I have to start my tax year in January, or can I start it in any other month? See Accounting Periods in chapter 2. 140ez What method can I use to account for my income and expenses? See Accounting Methods in chapter 2. 140ez What kinds of business income do I have to report on my tax return? See chapter 5. 140ez What kinds of business expenses can I deduct on my tax return? See Business Expenses in chapter 8. 140ez What kinds of expenses are not deductible as business expenses? See Expenses You Cannot Deduct in chapter 8. 140ez What happens if I have a business loss? Can I deduct it? See chapter 9. 140ez What must I do if I disposed of business property during the year? See chapter 3. 140ez What are my rights as a taxpayer? See chapter 11. 140ez Where do I go if I need help with federal tax matters? See chapter 12. 140ez IRS mission. 140ez Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. 140ez Comments and suggestions. 140ez We welcome your comments about this publication and your suggestions for future editions. 140ez You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 140ez NW, IR-6526 Washington, DC 20224 We respond to many letters by telephone. 140ez Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 140ez You can send your comments from www. 140ez irs. 140ez gov/formspubs/. 140ez Click on “More Information” then on “Comment on Tax Forms and Publications. 140ez ” Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. 140ez Ordering forms and publications. 140ez Visit www. 140ez irs. 140ez gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. 140ez Internal Revenue Service 1201 N. 140ez Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. 140ez If you have a tax question, check the information available on IRS. 140ez gov or call 1-800-829-1040. 140ez We cannot answer tax questions sent to either of the above addresses. 140ez Future Developments For the latest information about developments related to Publication 334, such as legislation enacted after it was published, go to www. 140ez irs. 140ez gov/pub334. 140ez What's New for 2013 The following are some of the tax changes for 2013. 140ez For information on other changes, go to IRS. 140ez gov. 140ez Tax rates. 140ez . 140ez For tax years beginning in 2013, the social security part of the self-employment tax increases to 12. 140ez 4%. 140ez The Medicare part of the tax remains at 2. 140ez 9%. 140ez As a result, the self-employment tax is 15. 140ez 3%. 140ez Maximum net earnings. 140ez The maximum net self-employment earnings subject to the social security part of the self-employment tax increases to $113,700 for 2013. 140ez There is no maximum limit on earnings subject to the Medicare part. 140ez Standard mileage rate. 140ez For 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56. 140ez 5 cents per mile. 140ez For more information, see Car and Truck Expenses in chapter 8. 140ez Simplified method for business use of home deduction. 140ez . 140ez The IRS now provides a simplified method to determine your expenses for business use of your home. 140ez For more information, see Business Use of Your Home in chapter 8. 140ez What's New for 2014 The following are some of the tax changes for 2014. 140ez For information on other changes, go to IRS. 140ez gov. 140ez Standard mileage rate. 140ez For 2014, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56 cents per mile. 140ez Self-employment tax. 140ez The maximum net self-employment earnings subject to the social security part of the self-employment tax is $117,000 for 2014. 140ez Reminders Accounting methods. 140ez Certain small business taxpayers may be eligible to adopt or change to the cash method of accounting and may not be required to account for inventories. 140ez For more information, see Inventories in chapter 2. 140ez Reportable transactions. 140ez You must file Form 8886, Reportable Transaction Disclosure Statement, to report certain transactions. 140ez You may have to pay a penalty if you are required to file Form 8886 but do not do so. 140ez You may also have to pay interest and penalties on any reportable transaction understatements. 140ez Reportable transactions include: Transactions the same as or substantially similar to tax avoidance transactions identified by the IRS, Transactions offered to you under conditions of confidentiality for which you paid an advisor a minimum fee, Transactions for which you have, or a related party has, contractual protection against disallowance of the tax benefits, Transactions that result in losses of at least $2 million in any single tax year ($50,000 if from certain foreign currency transactions) or $4 million in any combination of tax years, and Transactions the same or substantially similar to one of the types of transactions the IRS has identified as a transaction of interest. 140ez For more information, see the Instructions for Form 8886. 140ez Photographs of Missing Children The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. 140ez Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 140ez You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. 140ez Prev Up Next Home More Online Publications
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