Many people in Salt Lake City want to know how to file taxes with a 1099. The IRS refers to the money that you earn as a self-employed worker as non-employee compensation. Most people will get a 1099 if they have earned at least $600 in the previous year. However, if you made more than $400 in the previous year, then you will need to report your income.
If you want to know how to file taxes with a 1099, then it is important to note that the process is different than filing taxes with a W-2. There are several things that you will need to take into consideration.
One of the many great things about a 1099 is that you get the opportunity to claim tax deductions. However, the expenses that you deduct must be used for business purposes. There are ordinary and necessary expenses.
An expense is considered ordinary if the same expenses is regularly incured by people who work in the same field.
An expense is considered necessary if it is required to do your business. The expense does not have to be essential to be classified as necessary. For example, you have a graphic design business in Salt Lake City. You buy sophisticated computer software. This will be classified as an ordinary and necessary expense.
If your business expenses are less than $5,000, then you can file a Schedule C-EZ. You will need a Schedule C if your business expenses exceed $5,000. You calculate your profit by substracting your revenue from your expenses. You will need to put the profit on your 1040 form. You have to combine this with all of your other earnings.
A Utah tax preparer can help you if you have trouble classifying your expenses.
Filing taxes when you are self-employed can be tricky. Self-employed people have to pay Social Security and Medicare tax. Because taxes are not taken from your earnings, you will have to pay them yourself. You will need to calculate the taxes on your Schedule SE. You will calculate taxes based on your net profit. A Utah tax preparer can help you calculate how much taxes you owe.
When you get your 1099, you will see that no taxes are taken from your earnings. However, this does not mean that you have to wait until you get your tax forms to pay your taxes. You may have to make four estimated tax payments every year. The amount that you have to pay and the number of times that you have to pay per year will depend on the amount that you earn.
The way that you calculate your estimated taxes will also determine how much you have to pay. You can figure out your tax obligations by using form 1040-ES.
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