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AARP Foundation Tax-Aide

Frequently Asked Questions: Earnings From Self-Employment or Business

Q: Can I report as "Other Income" the $6,000 I made from providing day care services?

A: No, you are self-employed and must use either Schedule C or C-EZ to report your income and expenses. If the net profit from a service you provide is at least $400, then you must also complete Schedule SE to calculate your self-employment taxes.

Q: What is the standard mileage deduction for the use of a vehicle in a business?

A: The rate varies by year and sometimes changes within a year. The rate or rates are available in various IRS documents. You can find them in IRS Publications 17 and 334. In addition, you can find the rates for 2013 at IRS Notice 2012-95. Rates for years prior years be found on the IRS Standard Mileage Rates page.

Q: Can I take a business deduction for the small cash donations my business makes to various qualified charities in the neighborhood? I am a sole proprietor.

A: If you itemize your deductions, you can include these gifts with your other charitable contributions on Schedule A, as long as you have a receipt for each payment. You may not take a deduction for these gifts on your Schedule C.

Q: Will my self-employment income affect the amount of income I receive as Social Security benefits? I am 68 years old.

A: As you have already reached full retirement age, you may earn as much you want and not have to pay back any Social Security benefits you receive.

If your net earnings from self-employment are high enough such that you are paying self-employment tax, the Social Security Administration is notified of your contributions and income. If the additional credits were enough to entitle you to a higher monthly benefit, the Social Security Administration would make the calculation for you.

Lastly, depending upon your total gross income, social security benefits and filing status, you may have to pay income tax on up to a maximum of 85% of your social security benefits.

Through the AARP Foundation Tax-Aide program, AARP Foundation is providing online tax counseling as a public service, and cannot guarantee the accuracy of the information provided. Your taxes are your responsibility. You are solely responsible for what you do in your own tax situation.

The AARP Foundation Tax-Aide Program is a volunteer-run, free tax-preparation and assistance service offered to low- and middle-income taxpayers with special attention to those age 60 and older. Our volunteers are trained and IRS-certified to understand individual federal-tax issues. Our volunteers provide tax assistance as a public service and cannot guarantee the accuracy of the information provided.

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