Business tax forms
DISCLAIMER: THIS IS NOT LEGAL ADVICE. I AM NOT A LAWYER. DO NOT DEPEND ON THIS.
By Andrew Hudson Published: June 17, 2011 Updated: February 10, 2016
As a successful business owner, you’re going to learn all about delightful tax forms. Here’s a primer:
Basic U.S. Federal Tax Forms
- 1040: Form 1040 is the standard personal income tax form. If you’re just starting your photography hobby and have received one or two payments, then You’ll probably declare them on your annual 1040 as “Other Income.”
- Schedule C: If you’re getting multiple or recurring income, want to write-off some expenses, or operating as a sole proprietorship, You’ll need to file an addendum to your 1040 called a Schedule C. This is a tax form for your business, asking for income and expenses in order to calculate your net income or loss, which is carried over as a line item to the 1040.
- 1099: How does the tax man know that you’re operating a business? Because your income is reported by the company paying you. For any payments over $600, payees are required to report the transaction to the IRS on Form 1099-MISC.
- W-9: To complete a Form 1099, any company paying you over $600 will need you to complete a Form W-9. Whenever I get a new client, they often ask me to sign a W-9 before I can get paid, so I keep a signed form ready to fax to any company that requests it. A W-9 simply asks for your name as declared on your income tax return and your Taxpayer Identification Number (TIN).
- TIN: (Taxpayer Identification Number). If you’re just starting out and operating as a hobby or sole proprietorship with no employees or other complications, then your TIN is your Social Security Number (SSN). An SSN has nine digits, in the form xxx-xx-xxxx.
- EIN: (Employer Identification Number). This is a separate Taxpayer Identification Number required for anything more complicated than a basic sole proprietorship. You’ll need an EIN if you have employees, are a resident alien, or have a partnership, LLC, or corporation. An EID has nine digits, in the form xx-xxxxxxx.
- SS-4: To apply for an EIN, use Form SS-4.
There may be state, city and other forms. For more information, consult the IRS or a local tax accountant/specialist.
In the U.S., there is no federal sales tax but some states and cities levy it. California, for example, has a sales tax, so — since I operate a business there — I have to collect and pay sales tax on any tangible items I sell within the state. (Books delivered out of state, books sold to a wholesaler, and stock photos delivered electronically are not taxed). I had to get a seller’s permit and, each year, I fill in a Sales and Use Tax Return with the state Board of Equalization.
Note that sales tax is a tax on the seller, not the buyer, even though (in the U.S., not in Europe) the amount is usually added to the bill. Thus, the onus is on you know about and pay the tax.
Sales tax varies by region — country, state, and even city — so consult local help.