On One Hand

April 8, 2010

Self-Employment and Taxes: anybody know how that works?

Filed under: Uncategorized — ononehand @ 3:46 pm

2010 might turn out to be the first year I actually make more than $400 over the course of the year by doing freelance writing. There’s a possibility that I will earn considerably more than that if I decide I want to go all-out and do it full time, but that’s probably not going to happen.

In any case, I’m already on track to exceed what amounts to about a month’s rent from writing.

I don’t know how the hell to account for this other than reporting “extra income” on my tax forms next April. I’m assuming it’s actually a somewhat complicated and tedious process, as I am told I can deduct the cost of Internet service and new computers and other things I paid for just for writing, as business expenses (and those actually cost me much more than I was paid for writing last year – maybe not this year though).

I’ve also been told I can walk into Wells Fargo and tell them I need to set up a business account, and put all my freelancing checks there (and buy materials from that account) and my income is what I “pay” myself by moving money from that account to my personal checking or savings. Those self-payments are all I’d need to pay income taxes on (except maybe for business/corporate taxes… which, for me, would be like, what, $0.85 a year?) I can even pay for my health insurance directly from my business account and that doesn’t count as income. Is that correct?

I just don’t want to get audited by the IRS and learn that I neglected to pay $40 in taxes, and then they’d like, I dunno, come in to take my fucking socks and incense burner or something.

Am I at all on the right track here? As of now, my official business records are this college spiral notebook with handwritten numbers and dried up wine or grape juice on it.

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2 Comments »

  1. Or wine.

    No, but now I want some grape juice.

    Comment by mwittier — April 9, 2010 @ 5:23 am | Reply

  2. Schedule C

    Hey, Matt, with $400 in income and more than that in expenses, just use your legitimate expenses to wipe out the income. Then you can skip the Schedule SE (for self-employment taxes, id est, social security and medicare). Do NOT declare a loss, if you can avoid it, for if one has a loss in self-employment for more than two of five years, the IRS will consider it a hobby.
    I’ve been working at H&R Block for six straight years, and I’m about to go there this morning. I am unfamiliar with the laws in Colorado, but that should also eliminate any income tax from the state on that income. Here in Pennsylvania, there is a Schedule C as well as the federal. Check to see how Colorado handles self-employment. Also, check to see if the locals want some report on it as well. In Philadelphia, the authorities want a copy of the federal Schedule C.

    Comment by poimen — April 10, 2010 @ 11:08 am | Reply


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