Below is an article that the Internal Revenue Service (IRS) recently published on their website. “The IRS recognizes Small BusinessWeek May 4th – 8th, 2015. If you are a self-employed landscaper or gardener, visit IRS.gov for all of your federal tax needs. Here are a few things that you should know:
Accounting Method. An accounting method is a set of rules about when to report income and expenses. Many small businesses use the cash method. Under the cash method, you normally report income in the year that you receive it, and deduct expenses in the year that you pay them. Find out more in IRS Publication 538, Accounting Periods and Methods.
Business Taxes. There are four general types of business taxes. They are: income tax, self-employment tax, employment tax and excise tax. You may have to pay self-employment tax as well as income tax if you make a profit. Self-employment tax, or SE tax, includes Social Security and Medicare taxes. You may need to pay your taxes by making estimated tax payments. If you do, use IRS Direct Pay to pay them. It’s the fastest, easiest, and securest way to pay from your checking or savings account.
Tax Forms. There are two forms to report self-employment income. You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040. You may use Schedule C-EZ if you had expenses less than $5,000, and you meet other conditions. See the form instructions to find out if you can use this form. Use Schedule SE, Self-Employment Tax, to figure out your SE tax. If you owe this tax, make sure you file the schedule with your federal tax return.
Allowable Deductions. You can deduct expenses you paid to run your business that are both ordinary and necessary. An ordinary expense is one that is common, and accepted in the gardening or landscaping industry. A necessary expense is one that is helpful and proper for your trade or business. View the webinar “Small Business Owners: Get All the Tax Benefits You Deserve” to learn more.
Business Use of a Vehicle. If you use your car or truck for your business, you may be able to deduct the costs to operate the vehicle for business use. Refer to IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses for details.”
We at Kash Chandani and Company CPAs are very familiar with the material in this article. We want to help all of our clients with their IRS problems, and we believe that one of the best ways to do that is through informing our clients about important topics the IRS writes about.