Taxation for Sole Proprietors

Sole proprietors are individuals who own and operate their own businesses. For taxation, their business income is reported on their personal tax return, specifically on Schedule C of IRS Form 1040. This means profits are taxed as personal income, subject to income tax rates. Sole proprietors also pay self-employment tax to cover Social Security and Medicare, usually calculated using Schedule SE. They can deduct business expenses to reduce taxable income. It's important to keep accurate records and consider estimated tax payments throughout the year to avoid penalties for underpayment.