How to determine whether 1099-MISC income is from self-employment?
"These kinds of questions can be rather tricky. I've struggled with this sort of thing in the past when I had income from a hobby, and I wanted to ensure that it was indeed ""hobby income"" and I didn't need to call it ""self-employment"". Here are a few resources from the IRS: There's a lot of overlap among these resources, of course. Here's the relevant portion of Publication 535, which I think is reasonable guidance on how the IRS looks at things: In determining whether you are carrying on an activity for profit, several factors are taken into account. No one factor alone is decisive. Among the factors to consider are whether: Most of the guidance looks to be centered around what one would need to do to convince the IRS that an activity actually is a business, because then one can deduct the ""business expenses"", even if that brings the total ""business income"" negative (and I'm guessing that's a fraud problem the IRS needs to deal with more often). There's not nearly as much about how to convince the IRS that an activity isn't a business and thus can be thrown into ""Other Income"" instead of needing to pay self-employment tax. Presumably the same principles should apply going either way, though. If after reading through the information they provide, you decide in good faith that your activity is really just ""Other income"" and not ""a business you're in on the side"", I would find it likely that the IRS would agree with you if they ever questioned you on it and you provided your reasoning, assuming your reasoning is reasonable. (Though it's always possible that reasonable people could end up disagreeing on some things even given the same set of facts.) Just keep good records about what you did and why, and don't get too panicked about it once you've done your due diligence. Just file based on all the information you know."
"It's pretty easy. In the Interview Setup for Ufile, check the box for ""Self-employment business income"". Then during the process of filling everything out, you'll get a Self-Employment screen. It'll ask for the name of your business, but just put your own name since you don't have one. For the 6-digit classification code, click the ? button and look through the list for the industry that best matches the one for whom you wrote the technical report. Or you can go with 711500: Independent artists, writers and performers. It doesn't really matter that much so don't worry if it's a poor match. It will also ask you for your income and expenses.   I don't know exactly what costs you might have incurred to write your report, but you can likely claim a very tiny amount of ""home office"" expenses. Costs like rent (or mortgage interest + property tax), utilities, and home insurance can be claimed, but they have to be pro-rated for the time you were actually doing the work, and are based on the amount of space you used for the work.  For example, if you paid $1000 rent and $200 utilities for the month in which the work was done, and it took you 20 of the 31 days in that month to actually do the work, and you used a room that makes up about 10% of the square footage of your home, then you can claim: $1200 * 20/31 * 0.1 = $77.42 for your home office expenses. If you also used that room for non-business purposes during that time, then you reduce it even further. Say, if the room was also used for playing video games 50% of the time, then you'd only claim $38.71" I'm not sure how this gets entered in TurboTax, but this income from the company should be included in the Schedule C (or C-EZ) Line 1 Gross Receipts total, along with all of your 1099-MISC income from your business and any other income that your business took in. You don't need a 1099 from them, and the IRS doesn't care (at least from your perspective) if you got a 1099 or not; in fact, they probably expect you to have some non-1099 income.  We don't know why the company chose not to issue 1099 forms, but luckily it isn't your concern. You can fill out your tax return properly without it.  Note: This answer assumes that you didn't have any tax withheld from your checks from this company. If you did have tax withheld, you'll need to insist on a 1099 to show that. "This may be closed as not quite PF, but really ""startup"" as it's a business question.  In general, you should talk to a professional if you have this type of question, specifics like this regarding your tax code. I would expect that as a business, you will use a proper paper trail to show that money, say 1000 units of currency, came in and 900 went out. This is a service, no goods involved. The transaction nets you 100, and you track all of this. In the end you have the gross profit, and then business expenses. The gross amount, 1000, should not be the amount taxed, only the final profit." No, it's not possible. Even if you had no deduction or credits, your federal tax on $16,604 would be: $9075 @ 10% = $907.50 +  $7529 @ 15% = $1129.35 = $2036.85 That assumes you are filing as single. There must be more to the story.  Typo in your income numbers?  Also, what do you mean by a self-employment tax deduction? Maybe update your question to include a breakdown of everything you entered? Edit: As noted in Loren's answer, it seems that it is indeed possible in at least one case (self-employment taxes). You really shouldn't be using class tracking to keep business and personal operations separate. I'm pretty sure the IRS and courts frown upon this, and you're probably risking losing any limited liability you may have. And for keeping separate parts of the business separate, like say stores in a franchise, one approach would be subaccounts. Messy, I'm sure. As 'anonymous' already mentioned, I think the correct answer is to go see an accountant. That said, if you are already have to fill in a tax return anyway (ie, you're already a high rate taxpayer) then I don't see why it should be an issue if you just told HMRC of your additional profit via your tax return. I never was in the situation of being employed with a side business in the UK, only either/or, but my understanding is that registering as self employed is probably more suitable for someone who doesn't PAYE already. I might be wrong on this as I haven't lived in the UK for a couple of years but an accountant would know the answer. Of course in either case, make sure that you keep each an every scrap of paper to do with your side business. One of the triggers for audit is when the IRS can't match 1099 income to the tax return. Whoever got the 1099 in her name should include that income on her return. "From the IRS perspective, there's no difference between ""your taxes"" and ""your sole proprietorship's taxes"", they're all just ""your taxes"". While I could see it being very useful and wise to track your business's activities separately, and use separate bank accounts and the like, this is just a convenience to help you in your personal accounting, and not something that needs to relate directly to how tax forms are completed or taxes are paid. When calculating your taxes, if you want to figure out how much ""you"" owe vs. how much ""your business"" owes, you'll have to do so yourself. One approach might be just to take the amount that your Schedule C puts as income on your return and multiply by your marginal tax rate. Another approach might be to have your tax software run the calculations as though you had no business income, and see what just ""your personal"" taxes would have been without the business. If you think of the business income as being ""first"" and should use up the lower brackets rather than your personal income, maybe do it the other way around and have your software run the calculations as though you had only the business income and no other personal/investment income, and see what the amount of taxes would be then. Once you've figured out a good allocation, the actual mechanics of paying some ""personal tax amount"" from your personal bank account and some ""business tax amount"" from your business bank account are up to you. I'd probably just transfer the money from my business account to my personal account and pay all the taxes from the personal account. Writing two separate checks, one from each account, that total to the correct amount, I'm sure would work just fine as well. You can probably make separate payments from each account electronically through Direct Pay or EFTPS as well. As long as all taxes are paid by the deadline, I don't think the IRS is too picky about the details of how many payments are made." Do you get cash (or a deposit into your bank account) of your PhD stipend and then you immediately send the university a check to pay the tuition fee (which might be more than the cash you get from the University)? Or does the University simply keep the stipend money, transferring it from one pocket to another in essence, and say, OK, you have paid your tuition except for $X that you still owe us? Or does the university grant you a tuition waiver as part of your assistantship and reports this as income on Form 1099-MISC? In all of these cases, the money reported on Form 1099-MISC is not taxable income to you, and it is neither subject to Self-Employment tax (basically, Social Security and Medicare tax -- both the employee's share and the employer's share) nor to (Federal) income tax. Whether you're self-employed or not, knowing exactly how much tax you will pay is not always an easy task.  Various actions you can take (e.g., charitable donations, IRA contributions, selling stocks) may increase or reduce your tax liability. One tool I've found useful for estimating federal taxes is the Excel 1040 spreadsheet.  This is a spreadsheet version of the income tax return form.  It is not official and is not created by the IRS, but is maintained as a labor of love by a private individual.  In practice, however, it is pretty much an accurate implementation of the tax calculation algorithms encoded in the tax forms and instructions. The nice thing about it is that it's a spreadsheet.  You can plug numbers into various slots in the spreadsheet and see how they affect your federal tax liability.  (You may also owe state taxes depending on what state you live in.)  Of course, the estimates you get by doing this are only (at most) as accurate as your estimates of the various numbers you plug in.  Still, I think it's a free and useful way to get a ballpark estimate of your tax liability based on numbers that you can more easily estimate (e.g., how much money you expect to earn). "90% sounds like ""principal place of business"" but check these IRS resources to make sure." "I've done various side work over the years -- computer consulting, writing, and I briefly had a video game company -- so I've gone through most of this. Disclaimer: I have never been audited, which may mean that everything I put on my tax forms looked plausible to the IRS and so is probably at least generally right, but it also means that the IRS has never put their stamp of approval on my tax forms. So that said ... 1: You do not need to form an LLC to be able to claim business expenses. Whether you have any expenses or not, you will have to complete a schedule C. On this form are places for expenses in various categories. Note that the categories are the most common type of expenses, there's an ""other"" space if you have something different. If you have any property that is used both for the business and also for personal use, you must calculate a business use percentage. For example if you bought a new printer and 60% of the time you use it for the business and 40% of the time you use it for personal stuff, then 60% of the cost is tax deductible. In general the IRS expects you to calculate the percentage based on amount of time used for business versus personal, though you are allowed to use other allocation formulas. Like for a printer I think you'd get away with number of pages printed for each. But if the business use is not 100%, you must keep records to justify the percentage. You can't just say, ""Oh, I think business use must have been about 3/4 of the time."" You have to have a log where you write down every time you use it and whether it was business or personal. Also, the IRS is very suspicious of business use of cars and computers, because these are things that are readily used for personal purposes. If you own a copper mine and you buy a mine-boring machine, odds are you aren't going to take that home to dig shafts in your backyard. But a computer can easily be used to play video games or send emails to friends and relatives and lots of things that have nothing to do with a business. So if you're going to claim a computer or a car, be prepared to justify it. You can claim office use of your home if you have one or more rooms or designated parts of a room that are used ""regularly and exclusively"" for business purposes. That is, if you turn the family room into an office, you can claim home office expenses. But if, like me, you sit on the couch to work but at other times you sit on the couch to watch TV, then the space is not used ""exclusively"" for business purposes. Also, the IRS is very suspicious of home office deductions. I've never tried to claim it. It's legal, just make sure you have all your ducks in a row if you claim it. Skip 2 for the moment. 3: Yes, you must pay taxes on your business income. If you have not created an LLC or a corporation, then your business income is added to your wage income to calculate your taxes. That is, if you made, say, $50,000 salary working for somebody else and $10,000 on your side business, then your total income is $60,000 and that's what you pay taxes on. The total amount you pay in income taxes will be the same regardless of whether 90% came from salary and 10% from the side business or the other way around. The rates are the same, it's just one total number. If the withholding on your regular paycheck is not enough to cover the total taxes that you will have to pay, then you are required by law to pay estimated taxes quarterly to make up the difference. If you don't, you will be required to pay penalties, so you don't want to skip on this. Basically you are supposed to be withholding from yourself and sending this in to the government. It's POSSIBLE that this won't be an issue. If you're used to getting a big refund, and the refund is more than what the tax on your side business will come to, then you might end up still getting a refund, just a smaller one. But you don't want to guess about this. Get the tax forms and figure out the numbers. I think -- and please don't rely on this, check on it -- that the law says that you don't pay a penalty if the total tax that was withheld from your paycheck plus the amount you paid in estimated payments is more than the tax you owed last year. So like lets say that this year -- just to make up some numbers -- your employer withheld $4,000 from your paychecks. At the end of the year you did your taxes and they came to $3,000, so you got a $1,000 refund. This year your employer again withholds $4,000 and you paid $0 in estimated payments. Your total tax on your salary plus your side business comes to $4,500. You owe $500, but you won't have to pay a penalty, because the $4,000 withheld is more than the $3,000 that you owed last year. But if next year you again don't make estimated payment, so you again have $4,000 withheld plus $0 estimated and then you owe $5,000 in taxes, you will have to pay a penalty, because your withholding was less than what you owed last year. To you had paid $500 in estimated payments, you'd be okay. You'd still owe $500, but you wouldn't owe a penalty, because your total payments were more than the previous year's liability. Clear as mud? Don't forget that you probably will also owe state income tax. If you have a local income tax, you'll owe that too. Scott-McP mentioned self-employment tax. You'll owe that, too. Note that self-employment tax is different from income tax. Self employment tax is just social security tax on self-employed people. You're probably used to seeing the 7-whatever-percent it is these days withheld from your paycheck. That's really only half your social security tax, the other half is not shown on your pay stub because it is not subtracted from your salary. If you're self-employed, you have to pay both halves, or about 15%. You file a form SE with your income taxes to declare it. 4: If you pay your quarterly estimated taxes, well the point of ""estimated"" taxes is that it's supposed to be close to the amount that you will actually owe next April 15. So if you get it at least close, then you shouldn't owe a lot of money in April. (I usually try to arrange my taxes so that I get a modest refund -- don't loan the government a lot of money, but don't owe anything April 15 either.) Once you take care of any business expenses and taxes, what you do with the rest of the money is up to you, right? Though if you're unsure of how to spend it, let me know and I'll send you the address of my kids' colleges and you can donate it to their tuition fund. I think this would be a very worthy and productive use of your money. :-) Back to #2. I just recently acquired a financial advisor. I can't say what a good process for finding one is. This guy is someone who goes to my church and who hijacked me after Bible study one day to make his sales pitch. But I did talk to him about his fees, and what he told me was this: If I have enough money in an investment account, then he gets a commission from the investment company for bringing the business to them, and that's the total compensation he gets from me. That commission comes out of the management fees they charge, and those management fees are in the same ballpark as the fees I was paying for private investment accounts, so basically he is not costing me anything. He's getting his money from the kickbacks. He said that if I had not had enough accumulated assets, he would have had to charge me an hourly fee. I didn't ask how much that was. Whew, hadn't meant to write such a long answer!" "One way to do these sorts of calculations is to use the spreadsheet version of IRS form 1040 available here.  This is provided by a private individual and is not an official IRS tool, but in practice it is usually accurate enough for these purposes.  You may have to spend some time figuring out where to enter the info.  However, if you enter your self-employment income on Schedule C, this spreadsheet will calculate the self-employment tax as well as the income tax.  An advantage is that it is the full 1040, so you can also select the standard deduction and the number of exemptions you are entitled to, enter ordinary W-2 income, even capital gains, etc. Of course you can also make use of other tax software to do this, but in my experience the ""Excel 1040"" is more convenient, as most websites and tax-prep software tend to be structured in a linear fashion and are more cumbersome to update in an ad-hoc way for purposes like tax estimation.  You can do whatever works for you, but I would recommend taking a look at the Excel 1040.  It is a surprisingly useful tool." I believe it's not only legal, but correct and required. A 1099 is how a business reports payments to others, and they're required by the IRS to send them for payments of $600 or more (for miscalleneous payments like this). The payment is an expense to the landlord and income to you, and the 1099 is how that's documented (although note that if they don't send you a 1099, it's still income to you and you still need to report it as such). It's similar to getting a 1099-INT for interest payments or a 1099-DIV for dividend payments. You'll get a 1099-MISC for a miscellaneous payment. If you were an employee they'd send you a W-2, not a 1099. Just earning the money would trigger a 1099 (assuming other requirements are met).  It doesn't matter where the money is.