Today's tax question comes from Eric H. in New York. He asks, "I'm an independent contractor. Am I liable to pay taxes on income if my employer sends me a 1099 after January 31st? What about if I've already filed my return?"
Yes, you will need to make sure your tax return fully reports all your income earned as an independent contractor.
Basically, income reported on Form 1099-MISC should be reported on Schedule C or C-EZ. Nice thing about these tax forms: you get to deduct all expenses associated with your business as an independent contractor. You will be taxed only on the net profits (income minus expenses).
Don't forget to also add Schedule SE to your return. This form calculates the Self-Employment Tax on your business income. Again, you'll have to pay this tax, along with any regular income taxes, only if you have a net profit.
If you have not filed your tax return, just add these forms to your return, and you will be fine.
If you have filed your return already, things get a little more complicated. You will need to file an amended tax return. Form 1040X is used to report the difference between your original tax return and your corrected tax return. If you used software, there's a probably an option in the program to begin preparing an amendment. You would then make any changes and corrections, and Form 1040X will be automatically filled out with the original data and the new corrected data.
- Tax Tips for Independent Contractors
- Schedule C Tax Tips
- Self Employment Taxes
- Filing an Amended Return: Form 1040X
- Tax Forms and Instructions