What is Self Employment Income

When distinguishing between activities it considers employment and independent contracting, the IRS considers many factors. Employees are not only guided by their employers in what work should be done, but also how and when to do it, even if they work at home. Usually employees receive regular paychecks and payroll taxes are levied. The employer also pays half of its Medicare and Social Security taxes. Employees get aW-2 at the time of taxation. Not as closely supervised as employees are independent contractors. They often get project-based work. Independent contracts pay all their own Social Security and Medicare taxes through self-employment tax when they file their income taxes, and they receive 1099-MISC, not a W-2. Self-employment income is derived as an independent contractor from carrying on a "trade or business." An activity does not necessarily have to be profitable in order to be considered a trade or business, and you do not have to work at it all the time, but profit must be your motive. If you receive 1099 MISCs, this is simple-just count the total in box 7 "Nonemployee Compensation." Keep in mind, however, that you will receive a 1099 Misc only if you earn more than $600 from a company. You still have to report that income if you earned less.