WE see these too often among our kababayans in the home care or home health business. Receiving 1099-Misc seems to be the overwhelming means of income reporting in this field of work.
If you are an independent contractor or a self-employed person, the company or the employer whom you provided your services will issue you Form 1099-Misc, which will show the total payment made to you in the year. Sometimes, even when you are a regular employee, for some extra payments to you (like bonus, car mileage expenses or per Diem expenses), your employer may issue you Form 1099-Misc. Normally on the 1099-Misc payments, the employer/company will not withhold any taxes from your payments. This 1099-Misc income is treated as self-employed income (even if you are a regular employee). A self employed person must file the tax return if the self employed income is $600 or more.
Nice thing about these tax forms: you get to deduct all expenses associated with your business as an independent contractor. You will be taxed only on the net profits (income minus expenses). Your net income will then determine your self-employment income. Regular deductions, such as the standard deduction or itemized deductions won’t reduce your self-employment tax. This income-expense calculation is reported under a Schedule C, Profit or Loss from Business.
Reporting on Schedule C also applies for those who are in business for themselves, or carry on a trade or business as a sole proprietor.Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.
If you are self-employed, you generally have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you don’t make quarterly payments, you may be penalized for underpayment at the end of the tax year.
You can also deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.
If you need any assistance or have any question about a 1099-Misc or about self-employment tax, my office will be glad to assist.
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Evangeline is a California registered tax preparer, a legal document assistant for the general public, and a freelance paralegal offering assistance to various attorneys. She can be reached at her office at 2451 Colorado Blvd. #2, Eagle Rock, CA 90041 or at her marketing location inside the Eagle Rock Plaza. Her phone number is (323) 550-1869 or you can check her website at: www.evangelinegiron.net. She is a member of the court-endorsed California Association of Legal Document Assistant (CALDA) and an Associate Member (Non-attorney) of the LA County Bar Association (LACBA).
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