Freelance Tax Question

Heartlash

Hey H/A,

I was wondering if anyone knew off hand the minimum amount of money you have to make from a single client in a year to have report it on your taxes. I have a full time job, but occasionally do freelance work on the side. I remember hearing that if you only make under a certain amount (something like $400) you do not have to report it on your taxes (because it's technically a gift or something; it's intended to prevent kids who mow lawns from having to worry about paying taxes, etc).

Am I off base on this? If it helps, I'm in MA. I understand it may be different for federal vs state.

Thanks.

Daenris

As far as I'm aware you are supposed to report any and all freelance income. If you make less than $600 (I think) from a single client/company they don't need to send you a 1099 form, perhaps that's the number you're thinking of?

Edit: You should also be making quarterly tax payments, because if you just wait and pay it all at tax time you may have to pay a penalty.

Deebaser

This is possibly some horrible advice, but if I don't get a 1099, as far as Im concerned it never happened.

DrZiplock

Deebaser wrote: »

This is possibly some horrible advice, but if I don't get a 1099, as far as Im concerned it never happened.

Yea, it's some horrible advice.

They might not get you a 1099, but if they are cutting a check to you it's getting reported in some fashion on your end and theirs.

Unless they pay out in cash, you're going to want to report it.

I tend to take 30% of whatever I make from freelancing and throw it in a seperate savings fund for when tax time rolls around.


OP: The number that you're thinking of is 600 bucks. However, I don't know if it applies to each company only once or if it's a universal once a year thing.

Deebaser

DrZiplock wrote: »

Deebaser wrote: »

This is possibly some horrible advice, but if I don't get a 1099, as far as Im concerned it never happened.

Yea, it's some horrible advice.

They might not get you a 1099, but if they are cutting a check to you it's getting reported in some fashion on your end and theirs.

Unless they pay out in cash, you're going to want to report it.

White collar prison is gonna be SO AWESOME!

DrZiplock

Deebaser wrote: »

DrZiplock wrote: »

Deebaser wrote: »

This is possibly some horrible advice, but if I don't get a 1099, as far as Im concerned it never happened.

Yea, it's some horrible advice.

They might not get you a 1099, but if they are cutting a check to you it's getting reported in some fashion on your end and theirs.

Unless they pay out in cash, you're going to want to report it.

White collar prison is gonna be SO AWESOME!

Just remember, take someone out on the first day.

It'll make things easier.



The kicker is, yea, in most cases you'll likely get away with something like that. However, I just don't think it's worth the hassle to be honest. I use an accountant and it makes things a bunch easier. Her favorite quote during tax time is: Pigs get fat, hogs get slaughtered. And she's right. It's good to know the ins and outs of tax laws but claiming too much or not reporting things is what gets you a nasty audit.

Dman

In general: whenever you make money (from any source) write it down in an ongoing spreadsheet and put the details in a folder. Report your total earnings at the end of the year as income and pay your taxes.

A self employed person must file the tax return [1099] if the self employed income is $400 or more.

http://taxipay.blogspot.com/2008/03/w2-or-1099-employee-or-independent.html

U.S. tax law requires businesses to submit a Form 1099 for every contractor paid at least $600 for services during a year.

http://en.wikipedia.org/wiki/Form_2553#1099_series

Tax law always seemed unnecessarily confusing, this is no exception apparently.

Full Disclosure: I'm Canadian and never filed a US tax return

Heartlash

Got it, so if I make under $600 and don't receive a 1099, how do I file? Is there a form/process for that? Fortunately (or unfortunately, depending on how you look at it) this is the first year where I may make over $400 in freelance income.