&Tax Tips for the

hether a shop owner, an employee, or a booth renter (in-dependent contractor), you need to know your federal tax responsibilities, including how to report your income and tips you receive from your customers. The most common forms of business are the sole proprietorship, part-nership, and corporation. Your form of business determines which in-come tax return form you have to file. Publication 583, Starting a Busi-ness and Keeping Records, available free from the IRS, can help you decide. The purpose of this publication is to describe some of the Federal tax responsibilities that owners and workers must address each day. As a shop owner you can elect to structure your business in different forms. You can choose to operate your business as a sole proprietor-ship, partnership, or as a corporation. Your business may have employ-ees who work for you or you may decide to operate without employees. Another common arrangement is renting space to another individual who operates an independent business. This is commonly referred to as a booth renter and will be discussed later in this publication. It doesn’t matter which business structure you choose; there are basic principles that do not change. Income received in the course of your business is taxable income and must be reported on the appropriate income tax return form. If you operate your business without employees, where you are the only worker, then your federal tax responsibilities would be limited to reporting your income earned (including tip income) and expenses on the appropriate tax form. For example, a sole proprietorship would file Form 1040, using Schedule C to report business income and expenses and Schedule SE to report Self-Employment tax. Once you decide to hire workers you must make a determination if they are your employees or if they will operate their own independent busi-ness (booth renters).