Am I Self-Employed? (You might be surprised at the answer)
One of the things about their finances that surprises some of my clients the most isn’t how much taxes they owe. It’s the fact that they are self-employed. The truth is, just because your workplace calls you an “employee,” doesn’t mean you are an actual employee.
Here is how you can tell: if a boss or agency where you work gives you a Form 1099, then in the eyes of the IRS, you are self-employed. If you get a W-2, then you are not self-employed. All 1099 income must be reported on Schedule C on your Form 1040 unless you’ve already made a different tax arrangement. If you aren’t sure what I’m talking about, then you are likely self-employed.
I work with a variety of business types in different industries and many are self-employed. Here are some examples of industries where it is common for the person to be self-employed even though they work through a centralized office:
Physical or occupational therapists
Hairstylists
Speech pathologists
Creatives (writers, graphic designers, etc.)
Trainers
Fitness coaches
Real estate agents
Many in IT and technical jobs.
What to do if you are self-employed
If you didn’t realize that you qualify as self-employed, you may not have been tracking all the information you should have been or taking advantage of the tax deductions available to the self-employed.
If you are self-employed, you need to be keeping track of:
All your income (even if it’s not reported on a 1099),
All your expenses related to your work, and
Your mileage related to your work. (See IRS Publication 463 Travel, Gift, and Car Expenses for more information).
As you’re doing your taxes, you need to compare all your 1099s to the total income from your work. You are required to report all your income, even if you were not given a 1099 for some of it. Finally, you must file the correct tax forms that reflect your self-employed status. You will be required to pay self-employment tax in addition to income tax.
I highly recommend that once you realize you are self-employed, you hire a professional to help you with your financial records. Once your annual revenue approaches the six-figure mark, you should speak with a lawyer and your tax preparer to see if incorporating makes more sense for your situation.
Let me help
I work with many clients who fit the self-employed status. I can help keep track of all your bookkeeping and make sure you have the right financial records for your tax preparer to use.