Picking up a side hustle or becoming your own boss full time can change a lot in your life, including your taxes. If you did any freelance or independent contract work last year, here are five ways things might shift this tax-filing season.
You may get 1099s in the mail
Form 1099-MISCs show how much your clients paid you during the year. You'll need these forms to tally and report your income. If you receive a 1099, don't shove it in a drawer — whoever sent it to you also sent a copy to the IRS, so it wouldn't be a good idea to leave that information off your tax return. Also, if you did work for a client that hasn't sent you a 1099, you probably still need to report the money you earned there.
You'll probably need to file a Schedule C
This is where sole proprietors can report their business income and expenses. If you had less than $5,000 of business expenses, you might be able to use the shorter Schedule C-EZ instead. At tax time, a lot of your record-gathering and number crunching will revolve around completing this form. As a result, you may need to spend more on advanced tax software or human tax preparers.
You may need to pay self-employment tax
The IRS imposes a 12.4 percent Social Security tax and a 2.9 percent Medicare tax on your net earnings. Self-employed people pay the whole thing. A 0.9 percent additional Medicare tax may also apply if your net earnings exceed $200,000 if you're a single filer or $250,000 if you're filing jointly. To calculate how much you'll owe, you may need to add Schedule SE to your tax filing to-dos.
You might get a sweet new tax deduction
