What are the tax implications of being a sole proprietor?

What are the tax implications of being a sole proprietor?

As a sole proprietor, you report your business income on your personal tax return using Schedule C. You'll pay self-employment tax on your profits.

Do I need to pay estimated taxes throughout the year?

Yes, if you expect to owe $1,000 or more in taxes, you should make estimated tax payments quarterly to avoid penalties.

What deductions can I claim as a sole proprietor?

You can deduct business expenses like home office costs, supplies, and travel expenses related to your business.

Are there any specific forms I need to file?

You'll primarily use Schedule C for reporting income and expenses, and Schedule SE for calculating self-employment tax.

What happens if I don't report my income?

Failing to report income can lead to penalties, interest on unpaid taxes, and potential audits by the IRS.