Self-Employment Income this year? Here's how to report it.

Schedule C is the form to use when reporting Self-Employment and business income.

All income pertaining to the business is reported. Expenses are subtracted from income to determine if there is a gain (profit) or loss. The net profit or loss is entered on line 12 of Form 1040. If a taxpayer owns and operates more than one business activity, file a separate Schedule C for each business. Combine the profits and losses on Form 1040 line 12 if there is more than one Schedule C.

If net earnings from self-employment are $400 or more, the taxpayer must file an income tax return. If net earnings from are less than $400, the taxpayer may still have to file a return and would still report the net earnings.

Are you really self-employed?

Many businesses mislabel their employees as "self-employed independent contractors" to get Social Security, Medicare, Unemployment, and income tax relief. Generally:

• an employee is anyone who performs services if the employer can control what will be done and how it will be done.
• a person is an independent contractor if the employer/supervisor has the right to control or direct only the result of the work and not the means and methods of accomplishing the result.

If you think your employer should treat you as an employee instead of a contractor, file a Form SS-8. If the IRS agrees, they will send to you a determination letter stating you are an employee of that organization. You can then report your wages on Form 8919 and you will only be responsible for your share of Social Security and Medicare taxes. The wages are carried over to line 7 of Form 1040 and the Social Security and Medicare taxes are reported on line 57 of Form 1040.

The IRS has general guidelines for more information.

Can I deduct my medicare premiums?

Generally, medical insurance premiums including certain Medicare premiums are deductible on your Federal Income Tax if you are itemizing your deductions using Schedule A, Form 1040.

There is a limitation placed on deductible medical expenses. You can only deduct the amount of your qualified medical expenses that exceeds 7.5% of your adjusted gross income for the year.

Here is an example. You have an adjusted gross income for the year of $47,000, 7.5% of that is $3525. If you have $4000 of qualified medical expenses, $475 of that amount would be the medical expense deduction.

IRS Publication 502 is the publication that covers the rules about medical and dental expense deductions.

Here is what it has to say about Medicare Premiums:

Are you a tax cheat?

Take the quiz to find out if you are a cheat or not. Video courtesy of the CBS morning show.

1. You win $100 in the office pool and you don't claim your winnings when file your tax return.
2. Your friend gives you season tickets to a local theater in exchange you give her your vintage 8-track collection. You don't claim the $500 the tickets would have cost.
3. You hire a college student to watch your children during the summer while you work. You paid her a total of $2,000. You don't pay Social Security or Medicare taxes.
4. I work for XYZ company and one day a week my employer allows me to work out of my home office. I used that home office exclusively for that purpose. I declare that as a deduction.
5. You run a Day Care business out of your home primarily in the family room. You claim the family room as part of the home office deduction.