Taxes

As a Sole Proprietor you must report all business income or losses on your personal
income tax return; the business itself is not taxed separately. (The IRS calls this “pass-
through” taxation, because business profits pass through the business to be taxed on
your personal tax return.)

Filing a tax return

you must list your business’ profit or loss information on Schedule C (Profit or Loss
from a Business), which you will submit to the IRS along with Form 1040.

Estimated taxes
Because you don’t have an employer to withhold income taxes from your paycheck,
it’s your job to set aside enough money to pay taxes on any business income you
bring in over the year. To do this, you must estimate how much tax you’ll owe at the
end of each year and make quarterly estimated income tax payments to the IRS and,
if required, to your state tax agency.