Which Form to Use to File Federal Taxes for Self Employment Income Under $5,000

Which Form to Use to File Federal Taxes for Self Employment Income Under $5,000
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Having a small business complicates your taxes even if you make less than $5,000. If you make as much as $400, the Internal Revenue Service expects you to file a return for your business and pay the self-employment tax. You have to file a full 1040 tax return instead of a shorter version, and that's just for starters.

Schedule C or C-EZ

Usually, you report on your business' income, expenses, profits and losses on the Schedule C form. However, if you have a very small business, you might be able to use the simplified C-EZ form. To use it, you must have under $5,000 in expenses and no employees. You can't claim special deductions like depreciation or the home office deduction. If you track inventory, you have to use Schedule C.

Schedule SE

When you make over $400 from self-employment, you are responsible for paying the self-employment tax, which is equivalent to the taxes that an employer would withhold from your check and then match for Social Security and Medicare. It equals 15.3 percent of what you make up to a threshold and then 2.9 percent of what you make over that threshold. If you make $5,000 or less, you'll pay the 15.3 percent tax. Usually, you'll be able to file the short version of Schedule SE with your tax return.

Form 1040

Having a small business means that you have to file the long-form 1040 tax return. The shorter 1040-EZ and 1040-A forms don't have places for you to enter your self-employment income. You enter your income from Schedule C on line 12 where it is mixed with your other income. Your self-employment tax goes on the back of the form on line 56, although you usually get to deduct half of it on line 27.

Additional Tax Forms

Depending on the nature of your business, you could need to fill in other forms as well. If you buy big, long-lasting items for your business -- like a lawnmower for a summer landscaping business or a laptop for an online business -- you will either write them off or depreciate them on Form 4562. That form is also where you can detail mileage you drive for your business. If you use a room in a house you own or in an apartment you rent exclusively for your business, you can deduct its expenses on form 8829.