Independent Contractor?

Question

Here's the deal. I have 2 Part-Time jobs which I am an Employee at, so I get all of my taxes deducted.

I am considernig a job as an Independent Driver though, delivering Lost Luggage to Hotels/Homes in my area from the Airport. I will not be working a lot there, only when I have time, so its not like I will be making thousands of dollars a year just on this.

Question is, how do I go about reporting this income? How do I get started?

Answer 1

You'd be self employed and, if a sole proprietor, would use Schedule C. of 1040.

Answer 2

You'd file a schedule C or C-EZ showing your ic income and any associated allowable expenses, and a schedule SE to calculate your self employment tax.  The numbers from the bottom of the two schedules will go onto a form 1040 (not 1040EZ or 1040A) to calculate your total tax owed. The income from your other jobs will go on that same 1040.

Answer 3

Look at the IRS website (www.irs. gov) and look for these publications.

The instructions for Schedule C on the 1040 form

Publication 505 Tax Withholding and Estimate Tax

Publication 583 Starting a Business and Keeping Records

Publication 587 Business Use of your Home

Answer 4

You start by keeping track of your expenses, such as mileage.  Keep written records of dates, miles travelled etc.  

When you file your taxes, you report the payments on Schedule C, and from the payments you subtract your expenses.  You will owe income tax on the net profit.  You may also owe self-employment taxes of approximately 15%.

To allow for the increased tax, it would be good if you could increase your withholding at your regular job(s) so that you wouldn't have a large balance due when you file.  Somewhere betwee 15% - 25% of your net profit from the delivery job would be good to withhold for taxes.

Answer 5

And contrary to another post, you report every dollar of SE income.  If your NET earnings from self-employment are $400 or more, you ALSO file a schedule SE.

I would verify how mileage is done before accepting the work.  There are 3 ways this works:

1) (best, but very rare) you track mileage, turn it in, they reimburse you at 50.5 cents/mile and they *don't* add the money to your 1099-Misc. (Accountable plan)  You get no further deduction.  It's absolutely imperative that you keep copies of those trip logs.  Unfortunately, some firms that will state that you are on an accountable plan will chicken out when they go to fill out the 1099-Misc...at which point you *must* have the trip logs.

2) (2nd best) you track mileage, turn it in, they sort of reimburse you and they *do* add it to your 1099-Misc. (Non-accountable plan)  More work as you must include all income and then deduct the mileage on schedule C that you can document (your trip logs that you turn in are helpful in the event of an audit).  In theory you come out even.  (You can even come out ahead if your actual expenses are higher, but that's even more record keeping.)  

3) (Very stingy)  You track mileage, but they tell you your pay covers it and it's part of the lumpsum they give you for each delivery.  It's amazing how expensive gas is these days.  The extra tips you get when you deliver the bags (fully reportable as gross receipts!) won't really offset the cost.

PS, you must keep a "tip log" as well and I'd deposit the money every week so that in the event you get audited you can point to the log as well as your bank statements.

Answer 6

they will issue you a 1099, you will file a tax return with a schedule C--self-employment income

keep track of your expenses, nonreimbursed expenses

if they don't pay mileage, keep a calendar and log it each time

any other expenses from this work

If you make more than $300 you have to file a tax return

you may need to pay estimated quarterly taxes. . . .but if you have maximum withholding taken out of any other wages earned, you can skip that