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You have to keep track of tax deadlines, distribute your employees’ income statements, and complete your business and personal tax return all at once.
With that in mind, you may slip up and make a few tax errors. Here are some common mistakes and how to avoid them.
If you earned money from a side job and didn’t receive a form 1099-MISC or W-2 form, then you may think you’re off the hook from reporting it on your tax return. Think again.
The IRS requires taxpayers to report all income from any source. Even if it’s from a side job.
In fact, you’ll need to report it as self-employment income on a business tax return (Sch. C).
You might be confused and asking “I don’t have a business-Why would I file a business tax return?” According to the IRS, “All income earned through the taxpayer’s business, as an independent contractor or from informal side jobs is self-employment income, which is fully taxable and must be reported on Form 1040.”
In other words, even if you don’t consider yourself a business owner or self-employed, if you’re 18 years or older, you’ll still need to report income earned from side work as self employment income on a Business Tax Return (even if it’s less than $600).
This includes fees received from;
If you received a 1099 form in the mail, you may not be sure what it is or what to do with it. Whatever you do, don’t throw it out. You’ll need the information listed on the 1099 when filing your taxes during tax season.
1099 forms are used to report income not included on a W-2 [Wage and Tax Statement], in other words income that is not included in wages, salaries, and tips.
The 1099 is most commonly used to pay independent contractors, such as freelancers and consultants, who are not official employees of a company.
If you received a 1099, you’ll need to report the earnings listed as self-employment income on a business tax return. RapidTax is here to help.
There are 24 different variations of the 1099 form, covering far more than just nonemployee compensation. Different 1099 forms report different types of income from interest and dividends to real estate sale proceeds and debt cancellation. Some of the most common 1099s include the following;
