Whether you’re 100% freelance or have a side-hustle, if you perform work as an independent contractor, you’ll receive an IRS Form 1099-MISC from your client.
Filing taxes
The most common reasons you’ll receive a Form 1099-MISC are if you’re self-employed or work as an independent contractor. The IRS refers to this as “non-employee compensation,” and you’ll 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 when you file your income taxes (i.e. Form 1040 Schedule C). The deductions must be for business expenses that the IRS considers necessary and ordinary in your field but can include: office space (or a portion of your rent or mortgage if you have a home office), cell phone charges, equipment like laptops and printers, and mileage on your car. When you file your income taxes, you will subtract these deductions from your gross income to arrive at your net profit for your work as an independent contractor.
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 as an employee, these taxes are normally taken out of their paycheck and the cost is shared with the employer. But when you’re self-employed, you need to pay the entire amount of these taxes when you file your income taxes.
