Do you receive a Form 1099? What you need to know

Many people today get paid for work they have performed as an independent contractor. In this case, you receive an IRS Form 1099-MISC from the entity that hired you.

Filing taxes

Common reasons you would receive a Form 1099-MISC is if you are self-employed or work as an independent contractor. The IRS refers to this as “non-employee compensation.” You will need to file taxes for this income.

Deductions

One of the nice things about filing with a 1099-MISC is that you can claim deductions on your Form 1040 Schedule C, which you can use to calculate your net profit from self-employment. The deductions must be for business expenses that the IRS considers necessary and ordinary in your field. It depends on the type of work you do, but common business deductions include computers, software programs, equipment, etc.

Business in your home

If you are using a dedicated part of your home for your business activities, you should be able to claim this expense on your taxes. IRS Form 8829 helps you determine what you can and cannot claim. See a tax advisor for any questions about deductions that may apply to your taxes.

Self-employment taxes

Generally speaking, self-employment means that you will be paying your Social Security and Medicare taxes. For people who are paid by an employer, these taxes are normally taken out of their paycheck, but when you are self-employed, you need to pay the entire amount of these taxes.

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