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- A sole proprietor submits Schedule C with a personal 1040 tax return annually. They file Schedule SE with returns, paying self-employment taxes quarterly. Sole proprietors can write off expenses like office space.
- If you expect to owe $1,000+ in taxes for the year, the government requires estimated quarterly tax payments. If you owed no tax the previous year, you generally don’t have to pay estimated taxes.
- You may be responsible for additional taxes like payroll, property, sales, and excise. The IRS provides a reference list of taxes sole proprietorships may owe and forms required for each.
- It’s important to note that while employees only pay half of Social Security and Medicare contributions, sole proprietors must pay the entire contribution themselves when paying income taxes.
- Sole proprietors don’t need an EIN, but can use their Social Security number as their taxpayer ID instead. However, we recommend not using your personal bank account for business.
