We are contractors. How do we report our income?

August 06, 2014 by Dave Du Val, EA
Ocean

Aloha Dave,

We have a question: we have been asked to build some basic boxes to be used as a stage for a company. They plan to pay us but are not placing us on their payroll as employees. When we declare the income for taxes, what information will we need? What category to we list it in under "income"?

Mahalo,

Malia

 

Aloha Malia,

You are smart to ask about this now rather than waiting until tax season! If you earn more than $600.00, the company you are working for is required to issue you a 1099-MISC form showing the amount of your “nonemployee compensation.” This type of income is generally considered to be “business income,” and reported on Schedule C, Profit or Loss from Business. You are allowed to deduct your ordinary and necessary expenses associated with this business activity, and you will have to pay self-employment taxes on your net profit if you have a filing requirement. If the amount you will be earning is significant, you may wish to review the IRS’s information about Operating a Business.

You have to file an income tax return if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Form 1040 instructions (PDF).

Deductibly yours,

Dave

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David E. Du Val, EA
Chief Compliance Officer for TRI Holdco

 

Dave Du Val, EA, is Chief Compliance Officer for TRI Holdco. Inc., the parent company of TaxAudit, and Centenal Tax Group. A nationally recognized speaker and educator, Dave is well known for his high energy and dynamic presentation style. He is a frequent and popular guest speaker for the California Society of Tax Consultants, the California Society of Enrolled Agents and the National Association of Tax Professionals. Dave frequently contributes tax tips and information to news publications, including US News and World Report, USA Today, and CPA Practice Advisor. Dave is an Enrolled Agent who has prepared thousands of returns during his career and has trained and mentored hundreds of tax professionals. He is a member of the National Association of Tax Professionals, the National Association of Enrolled Agents and the California Society of Enrolled Agents. Dave also holds a Master of Arts in Education and has been educating people since 1972. 


 

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