Freelancers, contractors or other consultants, even if they work part-time on the side, can often have a more complex tax situation than the standard employee.<\/p>\n
You are an independent contractor in the eyes of the IRS if you receive a Form 1099-MISC. This form documents your earning from a specific client, as opposed to a standard employee\u2019s W-2. The IRS considers anyone who receives a 1099-MISC to be self-employed, whether as a freelance writer or an Uber driver.<\/p>\n
In some cases, you may be considered a \u201cnonemployee\u201d to the payer. They aren\u2019t required to include benefits, Social Security contributions, or income tax withholdings, which means you may make more money than a salaried employee.<\/p>\n
However, because the payer doesn\u2019t provide these things, you\u2019ll be required to handle it yourself. You may be able to deduct some relevant costs of developing, maintaining and growing your business.<\/p>\n
Independent contractors have to be diligent in their record keeping \u2013 ensuring business expenses and personal expenses are always kept separate. If at first glance the IRS doesn\u2019t approve your deductions, there\u2019s a chance you may get audited.<\/p>\n
Copies of whatever Form 1099-MISC you receive are also sent to the IRS by the client who paid you. Throughout the year, you\u2019ll be expected to pay self-employment taxes, usually in quarterly installments. These taxes cover 15.3% of your net profit toward Social Security and Medicare, along with your share of income taxes.<\/p>\n
Claiming Business Expenses<\/u><\/strong><\/p>\n To report your income to the IRS, you\u2019ll use a Schedule C, or a simpler version of the Schedule C-EZ. You also claim expenses on this form. Any net earnings greater than $400 require the filing of a Schedule SE to calculate self-employment tax.<\/p>\n When filing your return, ensure you have appropriate documentation to back up all your income and expenses<\/p>\n Net profit relates to the amount you were paid for goods and services, after you\u2019ve taken all your eligible business deductions.<\/p>\n Some deductions you may qualify for:<\/p>\n In order to claim business expenses, each expense must be considered ordinary and necessary, meaning it is common to the profession and develops or maintains your business.<\/p>\n Current expenses are those which benefit your business for less than a year.<\/p>\n Any expense not related to personal uses and can be directly related to the business may be deductible.<\/p>\n Expenses must be a reasonable amount to be deducted and shouldn\u2019t be inflated.<\/p>\n","protected":false},"excerpt":{"rendered":" Freelancers, contractors or other consultants, even if they work part-time on the side, can often have a more complex tax situation than the standard employee. You are an independent contractor in the eyes of the IRS if you receive a Form 1099-MISC. This form documents your earning from a specific client, as opposed to a […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[337],"tags":[91,108,215,92,93,136],"class_list":["post-1031","post","type-post","status-publish","format-standard","hentry","category-occupations","tag-1099-misc","tag-business-deductions","tag-business-expenses","tag-independent-contractor","tag-schedule-c","tag-self-employment-tax"],"yoast_head":"\n\n