I did freelance work for a Library this past Summer. I received an honorarium from them of $5,000 which also included my cost for materials in the payment. Should I have to pay tax on the full amount of $5,000, since I really only earned about $3,000 of that minus the materials cost? I just received my 1099 form and it lists the full $5000 as compensation and therefore taxable.
United States - 5 Answers
Random Answers, Critics, Comments, Opinions :
1 :
You should write in the material cost as a deduction.
2 :
Of course you kept the receipts for the materials and other expenses related to the project and you will of course itemize them on your return. And then you will of course keep them for the next 8 years in a safe place because you will of course be audited because that is how the IRS structures their time.
3 :
wow dude. Your not really a contractor are you? or just starting out? If your just starting out I will give you two bits of advice that has served me very well. 1)Hire the best people you can absolutely afford, then get out of their way and let them do their job. If you hired good people you wont need to 'boss' them. 2)CPA, CPA get a good CPA. A good CPA will cost you a little penny. (400 to 1,000 dollars depending on what you need from them) Now mind you I said CPA not that guy sitting at a folding table in the mall, and not those guys that will give you a same day 'instant tax rebate loan'. An actual CPA knows the tax law and knows what the IRS does not really care for you to know. things like: No that $5,000.00 is not taxable, and niether is that $3,000.00 . On that job you should have no more than $700 that counts as taxable income. (unless you make 60 to 80K on a 1099 format) If you have more than $700 of that end up as taxable, you aint doin your taxes right and you need a CPA. It may be too late for you to protect the lion's share of that money from the govt. or not, Be sure and file an extension before the April deadline, and set an appointment to see a CPA, this is the wrong time of year to be CPA hunting but you might get lucky. and certainly someone can work you in before your extension runs out. The cpa will tell you what can be protected from '07, and how to position yourself to protect your income in '08 and on. You can work a little bit to keep Uncle Sam from getting most of your money, or you can say 'it's not worth trying to figure it out, it's tooo confusing' Or the funniest one I hear: " I want my money back today, even if I am only getting about 20% of what I 'could' get." Protect your money, you earned it. Get a CPA
4 :
You will report this income on schedule C (Form 1040). You can deduct your business related expenses. Your net income is subject to self employment tax at 15.3%. For more info on self employed filing or independent contractor filing read: http://taxgeek.spaces.live.com/blog/cns!2EEA05E22BF141DC!119.entry
5 :
since you have to list this income on a schedule C, all related expenses are deducted from this income on the schedule C to arrive at your taxable "business" income - you will also need sch E for the FICA tax calculation related to that 1099 net income
Read more discussions :
- Where can I find a freelance job for in graphics o...
- What are all the ways by which we can get freelanc...
- Where can I find job listings for freelance copywr...
- Looking for FREE freelance job search sites
- # What type of people post projects on Freelance j...
- Does anyone know how you can get a job as a freela...
- What are the types of freelance job scams on the W...
- I'd like to know What is the best way to get illus...
