Tax-saving opportunities for the self-employed
Many people are career freelancers. Others find themselves doing freelance work after a corporate downsizing or other job loss.
Although being a freelancer, consultant, or independent contractor provides a new set of tax issues to consider, it also offers you plenty of new ways to trim your tax bill.
If you are paid $600 or more for your work for any individual client, you should receive a 1099-MISC from your customer. And, yes, the IRS gets a copy, too. Typically, you include Schedule C with your tax return to report the self-employed income – along with the deductions for your business expenses.
And if your net earnings from self-employment exceed $400, you will have to pay self-employment tax (for Social Security and Medicare), which is figured on Schedule SE. You deduct one-half of that SE tax as an adjustment to income on Form 1040. And if you have employees or use independent contractors in your business, you will have to file W-2 or 1099 forms for them.