Self-Employment on the Rise
At least that’s the conclusion that can be drawn from the latest IRS statistics on sole proprietorships. The number of Schedule Cs filed for 2011 by sole proprietors increased by 1.8% to 23.4 million returns over those filed in 2010. Here are some other interesting tax facts gleaned from these statistics.
Largest industry sectors
The largest sole proprietorship industrial sector, based on business receipts, was the retail trade sector, which accounted for 15% of the total receipts in 2011. Transportation and warehousing reported the largest increases in receipts (up 17.3%) and deductions (up 15.8%). The real estate and rental and leasing sector is the only industrial sector that experienced a downturn in receipts from 2010 to 2011, losing $0.2 billion.
Most common deductions
In terms of write-offs, the most were claimed for car and truck expenses, followed by salaries and wages (not counting the category of “other business expenses”). Other significant write-offs were claimed for:
- Contract labor
- Depreciation (including the Sec. 179 deduction for purchases of equipment and machinery)
- Rent paid on machinery and equipment
However, deductions for home offices declined slightly in 2011, compared with 2010.
- Profits on Schedule C. Profits rose by 5.6%.
- LLCs. The number of one-member limited liability companies filing Schedule Cs accounted for 4.8% of all such returns. The number of these entities rose ninefold since 2001. Their share of business receipts reported on Schedule C for 2011 was 19.3%.
- Schedule C-EZ. The simplified Schedule C was filed by 4.6 million sole proprietors, up 2.43% from 2010. Business receipts on Schedule C-EZ totaled only 2.9% of business receipts by sole proprietors.
These statistics demonstrate that there is an increase in self-employment. However, the increase is not as dramatic, in terms of the number of sole proprietors or the revenues they generate, that might be expected. I would have thought that the lack of employment opportunities would have forced more people to start their own businesses and become self-supporting.