Filing Taxes as a Business Owner

You may file your independent contractor or business taxes on your own, but we recommend working with a reliable tax preparer or accountant (especially if it’s your first time filing as an independent contractor), who can help you complete the correct tax forms and help you determine your deductions and expenses. 

There is no one right or best way to prepare your taxes, you are the only one who can find the best tax preparation path for your needs. The key is to be informed, do your own research, and ask questions.

Assistance with filing your own tax returns

The IRS can help many taxpayers prepare their own returns without the assistance of a paid preparer. 

Some options you can consider include:

• If your income is $62,000 or less, try Free File Software. Free File Fillable Forms.
• You may also use commercial tax preparation software to file your taxes electronically.
• You may find an authorized IRS e-file provider in your area through the IRS using the IRS e-file Provider Locator.
• There is also a free tax return preparation for qualifying taxpayers available through programs such as the Volunteer Income Tax Assistance Program (VITA) and Tax Counseling for the Elderly (TCE).

Finding a professional tax preparer

Similar to immigration services, you should be very careful when choosing a tax preparer. You do not want to become a victim to any scheme that offers unrealistic wealth or exemption from your obligation to file tax returns and/or pay taxes.

What to look for

While most preparers provide excellent and honest service to their clients, it is important to know that even if someone else prepares your return, you are responsible for all the information on the tax return, which is why it is very important to choose your tax preparer wisely.

When searching for a tax preparer you should:

• Check the person’s qualifications
• Check the preparer’s history
• Find out about their service fees
• Ask if they offer electronic filing
• Make sure the tax preparer is accessible and can answer your questions when needed
• Provide all records and receipts needed to prepare your return
• Never sign a blank return
• Review the entire return before signing it
• Make sure the preparer signs the form and includes his or her preparer tax identification number (PTIN)

There are a few forms you need in order to file your taxes. 

Forms you are responsible for: 

• W9 Form: Submit this form to the person or companies who have hired them. At the end of the year, They will file this information with the IRS, and include information about how much you were paid. Access the form with this link.You will be asked to submit this form to each client so they can keep track of how much they pay you.
• 1099 Form: This form is a summary of how much a client (or clients) paid you (if more than $600) mailed to you at the end of the year by each client.
• Form 1040: You use this form to report self-employment income.
• Schedule C Form: You use this form to calculate profit or loss from business (used for more complex businesses).
• Schedule SE Form: Use this to determine how much you pay in social security and Medicare taxes (in addition to income tax).

As an independent contractor or business owner, the IRS allows business expenses to be deducted from your earnings; expenses must be business expenses and not personal. What this means is that you only pay taxes on the money left over after you deduct business related expenses from money earned.

Keep a record of expenses

For any business expense, you must keep a record of each expense (date, purpose, amount, and copy of receipt) to prove that it was a business expense in case of an audit. You want to take as many legitimate deductions as you can, but you must be able to prove that the money was spent and that it was used for business purposes. 

We recommend keeping track of all expenses and deductions with detailed notes to help you file taxes and be prepared in case of an audit.

Common business expenses

Below is a list of common business expenses:

• Advertising expenses 
• Business insurance 
• Interest paid on business credit card or business loans 
• Professional services (i.e. lawyers, accountants, tax preparers) 
• Repairs for equipment 
• Office supplies 
• Travel costs 
• Business meals and other entertainment 
• Student loan interest deduction 
• Tax benefits for education

For more detailed information about business expenses, see IRS Publication 535, Business Expenses.

Check out these resources for more detailed information about ITINs, EINs, and filing taxes as an independent contractor.

Learn more about ITINs and EINs

• ITIN 101: Everything You Want to Know about ITINs, but Don’t Know What to Ask (Webinar)
• Immigrants Rising ITIN Guide
• Immigrants Rising ITINs, EINs, and Taxes Guide
• Sample letter for transferring your credit history here
• Sample letter for notifying the IRS of a newly assigned SSN

Tax and IRS Resources for Independent Contractors

• List of acceptable business expenses
  IRS Publication 535, Business Expenses
• Record self-employment income

W-9 Form

1099 Form

• Report self-employment income
  Form 1040
• Calculating profits and losses
  Schedule C Form
• Calculating self-employment tax
  Schedule SE Form

Tax Assistance

• Find an IRS e-file provider in your area
  IRS e-file Provider Locator
• Free tax return preparation for qualifying taxpayers
  Volunteer Income Tax Assistance Program (VITA)

Tax Counseling for the Elderly (TCE)