Final answer:
It is true that a self-employed individual must file a tax return if they have a gross income of $400 or more. They are subject to income tax and self-employment taxes, and may also be responsible for other taxes depending on their business structure and operations.
Step-by-step explanation:
True, a self-employed individual with a gross income of $400 or more from a business or profession must file a tax return. In the United States, self-employment income is subject to various taxes. The individual must report their earnings and is responsible for paying income tax as well as self-employment taxes which include social security and Medicare taxes, based on the net income of the business.
The Internal Revenue Service (IRS) requires a self-employed individual, which includes freelance workers, independent contractors, and small business owners, to file an income tax return if they earn $400 or more in net earnings from self-employment in a given tax year. This rule applies to the net income after subtracting business expenses from gross income. It is also essential to consider that self-employed individuals can have more complex tax situations, often requiring them to pay estimated taxes quarterly.
In addition to individual income tax, a self-employed person may also be liable for additional taxes, such as employment tax and excise tax depending on their specific circumstances and if they have employees.