You can take a depreciation expense using Form 4562. This may include computers, furniture, and machinery. You can also depreciate most business equipment that has a useful life of more than one year and that you actually use in your business for more than one year. You can take the business portion of your actual car expenses - like gas, insurance, registration, repairs, and maintenance - or any public transit expenses if you use local transportation. On the other hand, if you’re self-employed and you primarily work from your home office, whenever you spend time driving to and from a client’s office you can write off the mileage as a business expense. įor example, a company might pay an independent contractor or an employee for similar work, but as an employee, you typically don’t get to write off your commuting costs. One of the perks to being a self-employed contractor is a bit more leniency in what qualifies as a business expense. You might be able to use a substitute form to file your return or file your taxes online. 31 of each year for the prior calendar year.īut if you expect to receive a 1099 and don’t receive it by February 15, the Internal Revenue Service recommends you contact them. Businesses are required to send out Forms 1099 on or before Jan. You should receive a 1099 from any client who paid you $600 or more for your work during the tax year.Įven if you didn’t make over $600 in self-employment income and didn’t receive a 1099, you should still report your self-employment income. You’re required to complete and submit a 1040 every year by the tax deadline.įorm 1099, on the other hand, refers to the form you’ll receive if you’ve been paid as a self-employed individual (contract-to-hire, independent contractor, consultant, etc.). Here’s the simplest explanation.įorm 1040 is the individual income tax form that’s used for employees and independent contractors alike. There’s often some confusion with forms 10. If you are a newcomer to the world of contract work, make sure you educate yourself on Form 1099. With the added flexibility of contract work comes added responsibility. If you earned less than $400, you might still have to file an income tax return if you made more income from another source. If you earned $400 or more from self-employment, you have to file an income tax return. Not reporting the income may trigger an audit, which could result in paying back taxes, plus interest and penalties. If you’re self-employed (full-time or part-time) and earned an income but you don’t receive a paper form, maybe because it was lost in the mail or your address is listed incorrectly, you still have to self-report the income on your taxes. Or you might receive Form 1099-S if you received sales proceeds from a real estate transaction. You might receive Form 1099-R for distributions from pensions, annuities, retirement, profit-sharing plans, IRAs, insurance contracts, etc. There are a number of different 1099s, and each has specific tax-reporting requirements. If you want to keep more of your hard-earned money, take a close look at these seven common mistakes that many individuals make on 1099s, plus four tax tips to help you avoid an audit. As a result, you could make unintentional errors on your taxes. If you’re self-employed, you’re responsible for tracking your own income instead of having your income tracked through an employer’s payroll software. As a self-employed individual, you pay the full 15.3% tax, and deduct 7.65% of that tax as a business expense. However, because you do not work for an employer, you are responsible for the total tax amount. If you work for an employer, your company pays half the Social Security and Medicare taxes (7.65%) and you pay the other 7.65%, which your company will withhold from your paycheck. SE tax is a Social Security and Medicare tax for individuals who work for themselves. You must pay self-employment tax (SE tax) as well as federal income tax and state tax (if applicable). The reason you’ll receive an IRS Form 1099 is if you earned income as an independent contractor, sole proprietor, sole owner of an LLC, or a self-employed person.Īs a sole proprietor, you work for yourself, while small business owners who run LLCs, partnerships, or corporations may hire employees, independent contractors, or both.Īs a self-employed individual, there are certain filing requirements when it comes to tax time.
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