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Thu, Apr. 8th, 2010, 03:46 pm
Self-Employment and Taxes: anybody know how that works?

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.

Fri, Apr. 9th, 2010 05:23 am (UTC)
mwittier: Or wine.

No, but now I want some grape juice.

Sat, Apr. 10th, 2010 11:08 am (UTC)
poimen: 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.