Q: My small side business really doesn't take in very much money. Do I have to go to all this trouble?

A: It depends. You do not need to file Schedule SE if your net earnings are less than a threshold amount. Your net earnings are the money you collect when you sell your goods or services. They do not include your expenses.

Q: How do I compute my deduction for the self-employment tax?

A: Use Schedule SE. After you have figured out how much tax you owe, as described in the previous question, you multiply it by 0.50 (50 percent), and that's your deduction. It goes on the front side of your 1040, before you determine your adjusted gross income.

Q: I operate two small businesses. Do I file two Schedules for the self-employment tax?

A: No. The information about your earnings may be combined on Schedule SE. Prepare and file a separate Schedule C for both of your businesses.

Q: What business expenses can I deduct, and where do I do it?

A: Use Schedule C or Schedule C-EZ. You can use Schedule C-EZ if your business expenses do not exceed $2,500. Keep track of (and retain records for) the following kinds of items (not everything is completely deductible, but keep track anyway so you can deduct the full amount you are entitled to):

Q: Can I depreciate the computer I bought for my business?

A: Better yet, why not expense it? Depreciation is a rough measure of how much a piece of equipment loses value over time. In the case of a computer, as you know, the equipment ages very quickly. When you depreciate, you get to deduct a percentage of the value of the equipment each year. With a computer, you can deduct the entire value the first year. This one-year deduction of a piece of equipment is permitted under section 179 of the Internal Revenue Code, so it's called a "section 179 deduction." Get Form 4562 to claim the computer as an expense deduction. Note, however, that you may not be able to take the deduction under some circumstances, so you should probably talk to your tax professional.