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Reporting Income

As previously discussed, earned income are reported on the W-2 forms. Some income, however, are reported on the 1099 MISC form.

Why am I getting the 1099 MISC form?

If your compensation is reported in box 7 of the Form 1099 MISC, Miscellaneous Income, the payer is reporting you as self employed.

How to report income from Self Employment?

Income from self employment is reported on Schedule C and line 12 of the Form 1040 named Business Income or (loss). If line 12 of 1040 Form is filled out, then Schedule C or Schedule C-EZ must be attached to the tax return.

You may also owe self employment tax on income reported on a Form 1099-MISC.

Am I an employee or an independent contractor (self employed)?

Sometimes it is not obvious if a worker is classified as an employee or an independent contractor. An independent contractor is considered self employed whereas an employee will receive the W-2 form and proper tax withholding. An employee will not owe self employment tax to the IRS whereas an independent contractor usually does.

Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, has a series of questions that the IRS uses to determine if you are an employee or an independent contractor.

Reporting wages and other compensation

In general, box 1 of Form W-2 shows the total of all your income from your job that you must enter on line 7 of the 1040 tax form. If you receive tip income, you also have to add the tips not included in box 1. The income shown in box 1 is your gross pay before your employer withholds:

  • federal and state income taxes,
  • social security and Medicare taxes and
  • other withholdings.

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