General Question

capet's avatar

(US) How do I pay taxes on $300/yr independent contractor income?

Asked by capet (876points) June 13th, 2022
8 responses
“Great Question” (1points)

My best guess right now is that I do the following:

1. Pay estimated taxes if I feel like it, but I probably won’t have to;
2. Include this income in IRS schedule C and schedule SE;
3. End up paying zero “self-employment taxes” at the federal level, but including it in my AGI which which slightly increase my tax liability at the federal and state level.

Am I close?

I’m okay with using TurboTax or something, but not until I understand the basics mysefl.

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Answers

Tropical_Willie's avatar

If that is your only income . . .you don’t pay taxes.

kritiper's avatar

If you have other income from a regular job, and you get W-2’s to attach to your income tax forms, file the added amount with your regular taxes on the forms. And you may have to use forms C and SE. The tax forms will tell you how much, if any, self employment taxes you must pay. Consult the informational Form 1040 tax booklet (Instructions for Form 1040) for all the details.

capet's avatar

Thanks @kritiper—I will look into that more for sure, but here’s why I was thinking I wouldn’t end up owing any self-employment tax (but that I would owe income tax from my self-employment income, which I am interpreting as a different thing—so confused!):

In the IRS form 1040 SE (https://www.irs.gov/pub/irs-pdf/f1040sse.pdf), item 4c says “Combine lines 4a and 4b. If less than $400, stop; you don’t owe self-employment tax.”

Am I misinterpreting? (That seems likely)

capet's avatar

Good points @Tropical_Willie and @kritiper . Yes, I do have other income from wages.

Call_Me_Jay's avatar

1) “Self-employment tax” means you pay the full Social Security and Medicare amount. Most people pay half and their employers pay half. So you pay 15.3% (instead of the 7.65% paid by employees).

2) Turbotax works great, and I can also recommend FreeTaxUSA. They lead you through questions and fill out the correct forms. Both are free for simple tax returns.

3) Whether $300 is your entire income or on top of your W-2 wages, the software will figure out the impact and the correct forms and amount owed or refunded.

RocketGuy's avatar

You only make $25 a month?

capet's avatar

@RocketGuy from my side hustle, yes (I actually make less right now).

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