How do I file taxes for random website work?

Question

I have a primary job in another field, but I have many friends and a few businesses asking me to do their websites. These are very few and far between but I do charge.

What do I need to do to be legal with this side work? I live in California -- do I file taxes quarterly or can I wait until the end of the fiscal year? How much do I need to prepare to take out? I'm doing everything under my own name, not under a business name...so is that contracting?

I am so absolutely confused - to the point I don't even want to start doing websites, even though the extra income would be nice.

I know this "question" is just a convoluted mess. But, if anyone would be kind enough to take me through this process it would be greatly appreciated.

Answer 1

File Schedule C or C-EZ with your tax return. You'll account for your income and business expenses there. The total profit goes to Form 1040 where you figure the income tax and also to Schedule SE to figure the Self-Employment taxes. You have to pay Self-Employment taxes if you have more than $400 in profit from Self-Employment in any tax year. The Self-Employment tax is levied at 15.3% of 92.35% of the net profit from the business.

If you start making a lot of money with this you'll need to start making quarterly estimated payments to the IRS using Form 1040-ES. You can download the package on the IRS website and use the worksheets to estimate your income and the amount of the taxes due.

CA has a similar requirement. Check the FTB website for the relevant instructions and forms.

In lieu of making estimated payments you can have extra money withheld from your W-2 job to cover the taxes on the Self-Employment gig if you wish. That may be less painful than cutting checks for several hundred or even thousand every quarter for the estimated payments.

Contrary to what another poster has stated, you must claim ALL of this income. You may or may not receive 1099s for the money you earn but you must claim all of it and pay tax on all of it.

Answer 2

If you do work and it amounts to over $500, you need to get a 1099 from that person and claim it as income at the end of the year. Once you've claimed self employment income, the IRS will ask you to do estimated taxes and pay in advance. When in doubt contact a tax specialist.