I’m working as a sole proprietor in two different side hustles. You’ll probably receive a 1099-NEC form reporting those earnings, and you’ll typically report that income on Schedule C when you file. Both the payor and the payee should receive a copy of a 1099 for that exchange, and in some cases the payee may report this income on a Schedule C.įor example, let’s say you’re tutoring ESL (English as a Second Language) students online as your side hustle. The 1099 series of forms reports money exchanged between a payor and a payee, whether it’s via cash, debit or credit card, check, or third-party payment systems like Venmo or PayPal. If that’s the case, you may have to file on income documented on both a W-2 and a Schedule C. Remember, you can be both an employee in your full- or part-time job and be a nonemployee working your side hustle or freelance gig at the same time. A W-2 reports the income you’ve earned by working as an employee of a business, but a Schedule C reports income you’ve earned by being self-employed, either as a single-member LLC or a sole proprietor. If you need to report an LLC’s farm income and expenses, use Schedule F, Profit or Loss From Farming. For example, if you need to report single-member LLC income or loss from rental real estate, royalties, partnerships, estates, or trusts, you’ll use a Schedule E, Supplemental Income and Loss. In most cases, you’ll report your LLC’s profits or loss on the Schedule C, but there are a few minor exceptions. You may hear this kind of LLC referred to as a “disregarded entity.” The LLC’s activities, whether it made a profit or experienced loss for the tax year, should be reflected on your personal tax return. If you run a single-member LLC (Limited Liability Company), the IRS makes no distinction between you and the LLC when it comes to taxes. Part V is subtitled “Other Expenses” and it’s sort of a catch-all for any other eligible expenses that weren’t listed as a line item in Part II.įrequently Asked Questions Does a single-member LLC need to file a Schedule C?.2 Just remember to organize any receipts related to your milage and maintenance! You’ll need information like the total number of miles driven during the tax year, the number of miles driven for the business, and the number of miles driven for commuting to and from the business (if you’re renting an office space, for example). Part IV is where you’ll calculate any vehicle expenses associated with your business (if you had any).(And by gross, we don’t mean chewing with your mouth open.) Add any additional business income, like interest or awards, not reported on Line 1 and boom! You’ve got your gross income. Once you have your cost of goods sold, you go back to Part I and subtract it from your earnings to get your gross profit. Keep in mind, inventory refers to your actual cost, not the selling price. You take your total inventory and subtract your remaining inventory (let’s say it’s $5,000) to come up with your cost of goods sold. At the beginning of the year, you had $10,000 in inventory, and over the year, you added $2,000 in inventory for a total of $12,000. Here’s a quick example of what Part III might look like. If you earned income from selling stuff-exotic fish, cookies, baseball cards, crafty creations, etc.-you’ll need to report the cost of that inventory. Part III is where you’ll calculate the cost of services and goods sold.(In case you’re wondering, those vanilla lattes you bought to keep yourself caffeinated do not count as business expenses. Just remember that the IRS says these expenses must be “ordinary and necessary” to your business. That includes stuff like home office expenses, advertising, vehicle use, office supplies, equipment and software, business travel and meals, phone and internet costs, and start-up costs.īut here’s some good news: Qualified business expenses (like the ones we mentioned above) are tax deductible, which means they reduce your taxable income and lower your tax bill in the process. Part II is all about reporting your business expenses.Unfortunately, you have to pay taxes on it all! You’ll also need to add any other money you earned while being self-employed. If you received any 1099-NEC, 1099-MISC or 1099-K tax forms reporting money you earned working as a contractor or selling stuff, you’ll have to report that as income on Line 1 of Schedule C. This could be from a side hustle, like driving for Uber or selling honey at a farmers market, or from something you do full time, like working as a carpenter or a freelance writer. This is where you add up the money you earned from being self-employed.
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