I am somewhere in the 5K-8K tax bracket in self-employment tax. I was wondering if it would be a good idea to use the free version of turbo tax to file my return. There seems to be a version for small businesses as well but that is much more expensive. I also have a question on tax in general: I am a student who pays my tuition in loans. Can I claim the money I pay as a Lifetime Learning Tax Credit even though I don't pay out of pocket? Also, I am a little confused by the whole self employment tax. Do I file a state and federal income tax on top of a self employment tax or does the SE tax take the place of the federal income tax? Or does the SE act as another item on the income tax?
SE tax is calculated as part of the Federal Income Tax. Schedule C is the form you have to complete and it will instruct you on how much SE tax is due. (Roughly 15% of your Net Profit for the Business). You can use Turbo Tax or any of the Free E-File options listed at irs.gov. Just be aware most of the free services will charge for the State return. The really bad ones won't even let you print it to mail it in. Also, if you use one of those Free E-File options check that Schedule C is included as part of the free service. edit: looks like you might be able to use Schedule C-EZ. Here's the list of requirements : http://www.bankrate.com/finance/money-guides/schedule-c-vs-c-ez.aspx
In case you are in the 5-8k tax bracket, you will be probably easy and do not even need to bother with the 3rd party software. Remember, if the 3rd party software messes up, IRS will go after you not after the 3rd party tax sw provider. So, there are some benefits in the 3rd party tax software, but there are also some drawbacks associated with it. Just reading forms and schedules instructions patiently and thoroughly, and you might be fine. I have run into some tax software that had mistakes. If you make 5-8k, you will be easy, you report your income on line 12 on 1040 as business income, then you fill out schedule C, and you also fill out schedule SE (where you practically calculate your tax - since you make so little, the SE tax on schedule SE will most likely be the only tax that you have to pay). There are many sources online that provide more information if needed if the instructions are not enough. See here for the Schedule C instructions: Schedule C instructions and here for schedule SE instructions: schedule SE instructions. General advice on the federal tax return completion (rounding, sort order, etc.), here is a good page on federal tax return: federal tax return. There are many sources online, and your case if you make only so little won't be complicated, so using the tax software is not a great benefit. It does not save you very much time, and by using it, you increase your risks of having it wrong.