I am considering taking a freelance job (one time) and the company will send out a 1099 form. Do I need to put this on my taxes if it is below the $600 requirement? If I do claim it, will I be taxed a lot on it? If I will be taxed too much then the job becomes not worth the amount of money I would be left with. Will I need to make a tax payment before April or should such a low amount just equal out with my tax returns?
2007-07-10 04:14:14 · 9 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
If you have little or no other taxable income, and your net income from this job is under $400, you are not required to file a tax return or pay any taxes. Otherwise, you are required to file a tax return and pay taxes even if this is your only income.
The following assumes you are required to file a tax return.
Your net income from this job is what will be taxed. You can subtract all expenses related to generating this income, including travel to the work site, equipment, and supplies. If your net income is under $400, you will owe only income tax on this income. If your net income is $400 or over, you will owe both income tax as well as Social Security and Medicare taxes. If your total income subject to SS is under $97,500, you will pay about 15% Social Security and Medicare taxes on the net self-employment income. If your total income subject to SS is $97,500 or more, you will pay only the Medicare taxes of 2.9%. The Social Security and Medicare taxes are in addition to income tax.
Best case: No taxes owed if your net is under $400 and you have little other taxable income.
Worst case: About 40% federal taxes owed, including income, SS and Medicare.
2007-07-10 06:44:07 · answer #1 · answered by ninasgramma 7 · 0⤊ 0⤋
It needs to be mixed in with your total earnings for the year. Most states and Federal, that limit of reporting on a 1099 is $500 on the employer side. Even if it was under that limit, it would be your responsibility to add it into your total earnings.
No taxes are withheld from the pay, so it will feel like you are paying a lot of taxes on the money. However, it will be about the same as if it was withheld from your pay at the time of payment. The amount will all depend on how much money you have earned from other jobs.
With only about $600, you should not need to make a quarterly payment for taxes, unless you have other 1099s coming for the year.
2007-07-10 04:22:59 · answer #2 · answered by Robin C 5 · 0⤊ 0⤋
Yes you do, actually whether they send you a 1099 or not, it's still taxable.
The limit by the way is $400, not $600, where you have to report it and pay taxes. And even that's only if it's your total income for the year. If you have other income and are filing anyway, you'd be required to report it even if it was only $1.
The $600 limit you're thinking of is the point at which the company is required to send you a 1099. But even if they don't, it's still taxable.
You'll owe self-employment tax on your net from the freelance job of 15.3%, plus any income tax that you owe. For that amount, you won't have to make quarterly payments.
2007-07-10 05:26:05 · answer #3 · answered by Judy 7 · 0⤊ 0⤋
Yes, you MUST claim the income. Yes, it's taxable income. You'll pay both income and self-employment taxes on it. You may not have to make any estimated tax payments on a single $500 job but the actual tax will depend upon your marginal tax rate.
The $600 requirement is for the filling of the Form 1099. At $600 they are mandatory. At less than $600, they're optional.
2007-07-10 04:18:53 · answer #4 · answered by Bostonian In MO 7 · 3⤊ 0⤋
You'll have to add it to your end-of-year tax return because the company will be adding it to theirs and if the IRS checks both returns and you don't claim it, you could get audited. You can get a booklet from your local IRS office to find out how much tax you'll be paying on it. You can call your state's tax office or look them up online to find out what the state tax percentage is for your area.
If you have questions about self-employment (since you really aren't setting up a self-business, then call the local IRS office).
2007-07-10 04:18:31 · answer #5 · answered by lanagrl78 4 · 0⤊ 1⤋
You will need to claim it if all of the jobs you do for all different companies exceeds $600. If it is the only side job you are doing, then you will not hit the limit and do not need to claim it.
2007-07-10 04:28:17 · answer #6 · answered by Strategic Sourcing Expert 4 · 0⤊ 1⤋
Technically, you are supposed to pay taxes on any money you earn.
2007-07-10 04:22:08 · answer #7 · answered by Anthony 3 · 0⤊ 0⤋
Go to your nearest IRS office and ask these questions.
2007-07-10 04:23:19 · answer #8 · answered by Anonymous · 0⤊ 1⤋
your suppose to, doesn't mean you have to
2007-07-10 04:18:44 · answer #9 · answered by Scott M 5 · 0⤊ 3⤋