I have read the IRS rules to determine if my side job is a hobby or business but I fall somewhere in between. It seems like the IRS would rather you consider it a business if you’re making money and just a hobby if you’re not. Well in my situation I did make money in 2009 from the side job but I only decided to get a separate business account, DBA and become more serious in 2010.
My deductions exceeds the the 2% Gross rule therefor going with hobby eliminates me having to pay an additional self employment tax and of course the higher audit rate that every keeps talking about with filing a schedule C. Your advise is appreciated.

Hi everyone! Thanks in advance for even reading my question. And if you have any input it would be much appreciated!

So I have already filed my taxes! Yeah! But…I just received another 1099Misc in the mail (Isn’t it way too late for that, legally?) representing about 5 in income. What to do!?

I am an actor and so receive, like many other professions, both W2s and 1099s. While doing my taxes this year I had all of my 1099s entered and I realized that that 5 was not accounted for. So I entered that income, without having received the 1099misc yet, in some field (I used Turbo Tax) called "other income" or "additional income" that applied it towards my profit from business/business income (where the other 1099misc were applied to). Then a week later I receive the 1099misc!! So annoying!

SO….I did report the income. But do I need to amend my taxes and report it under the 1099misc and take it out of the "other income" column? It will change absolutely nothing on the bottom line.

As mentioned I am an actor. I don’t make much money so I am using the Qualified Performing Artist deductions and other work related deductions. I assume that that makes me a larger target for audit and I dread that like everyone does. So I don’t want to become a larger target!

Thanks everyone!!
c.e.h.
Thanks guys for all the info…heres the thing. I DID include the income in question on my schedule C-EZ. It was added to line 1 (Gross receipts) with the totals from the 1099misc i did enter. And so it was included in the net profit on my schedule SE when determining my self employment tax. I did not add it to line 21 of my 1040.

So the question stands, knowing this. Since I did pay taxes on it, do I still need to amend my taxes putting that income with the 1099misc even though the totals/bottom line would not change?

You guys are great! Thank you!
Thanks JVTM! That would be very helpful!!

Yes we are in the same boat. Everything was claimed in the right place, just less the 1099 form itself. Anyone else have any input?

I have had a very part-time photography business for the last six years. I’ve had a NOL every year because the income from the business is less than the amount I spend on equipment for the business. This year I’m having to reclassify my business as a hobby because it has not had a profit in five years. I’m not filing Schedule A Itemized deductions because my allowable deduction is limited to business income amount which was 0 which is much less than the standard deduction of 50. I’ve listed the type & amount of income from photography on line 21 of form 1040. Am I considered self-employed, do I need to fill out Schedule SE self-employment tax form?
Charles, Thanks, you answered a previous question of mine too.
Robyn, it’s comforting to have the advice of an expert. Thank you!
Bob, I have no mortgage or property taxes & I made less than K in 2008. I filled out a Schedule A & my total itemized deduction is 6 because of the 2% limit. In previous years I filed Schedule C & Form 4562. I would usually Section 179 anything that cost less than 0 & depreciate anything that cost over 0. I purchased over K worth of equipment in 2008. Now that I have most of the equipment that a professional photographer needs, I must classify my business as a hobby. It’s disappointing but now I know I need to work harder at making a profit if I’m gonna say I have a Photography Business. Thanks for your answer.

I completed my taxes today and TaxAct printed the following:
Form 1040
Schedule C "Profit or Loss from Business"
Self-Employment Tax
Tuition and Fees Deduction

Ok I know I have to file 1040 and Schedule C, but I’m not sure about the other two… should I file them too….?

Thanks…

I started a sole proprietor business in 2008 and am calculating values for 2008 federal and state taxes. I buy items, and have them shipped directly to the customers. Can my profit total (before deductions) be after shipping fees, or is that before and the shipping fees are deductible afterward? I really want to do these right, and it’s a big deal because I will have to pay the 15% self employment tax on all profits before deductions. For example…Sally Sue purchased an item from me for 0. It cost me 0 to buy the item and send it to her. But I also paid in shipping costs. SO do I claim as my profits and then have a tax deduction of , or do I claim as my profits? By claiming I’m paying .50 in self employment taxes, but by claiming I’m only paying .50. And when those numbers equal thousands of dollars, it’s a huge difference.
To Morpheus: I do not make profits on shipping, and that is not what the question was. What I am asking is if the government will want me to provide a base profit BEFORE shipping expenses that I paid and then just deduct shipping expenses as a tax deduction OR if they see shipping expenses as something that can be deducted before base profit is recorded. In my example of the customer paying 0 and I pay 0 plus for shipping, that is saying that the customer paid 0 plus shipping, totally 0. I am an eBay seller, and do not condone cushioning shipping charges to make more profit, again that was not what the question was.

I currently live in the US and am considering a move to Montreal. I operate a home business, and all of my income is coming from US sources, but I have been told that Canada taxes all worldwide income. Then it seems that the US would give me some sort of tax credit for what I paid to Canada.

I expect to make ,000 before deductions. Does Canada have a similar system as far as self-employment taxes? Do they have a self-employment tax?

What abouts would I have to pay for tax, including federal and provincial?

I’m trying to understand the rationale behind WHY the use AGI instead of business income. And more specifically, I know they will add back depreciation which makes sense – but would they also add back things like "student loan interest deduction"? What about "1/2 of self employment tax deduction"?

When a bank is deciding whether or not to give you a loan, the use of a Debt to Income ratio already takes into account your monthly student loan payment, so it seems like "double dipping" that they can use it to knock down your income a few notches lower, and then turn around and also have that same category take away from your monthly spending power.

And don’t get me wrong, I completely – 100% – agree with your debt to income ratio being affected since a student loan is a monthly expense, but it’s hard for me to understand why they would also reduce your income for something that has nothing to do with the bottom line of your business income earning power? It seems to me like it would be fair to do one or the other, but not taking away from both sides.

If the gov’t wants to give you a deduction for student loan interest, or for 1/2 of self employment tax, and that reduces the amount you pay them then great. But I’m not seeing how the gov’t giving you a tax credit really has much to do with your ability to pay back the bank mortgage. You’ll pay the bank back if your business is profitable, how much money you are bringing on an income statement (Income – expenses = net profit).

Can anyone help me to understand this?
"AGI what you pay bills with"

Actually, I’m failing to see that connection. My student loan interest is already accounted for in the debt to income ratio the banks use. Right? So why are they then going and reducing my income as well?

My employer has recommended that I form an LLC and be paid as an independent contractor via 1099. I am married, we filed jointly last year. We are located in IL. I work out of my home office, use my vehicle for business travel sometimes and entertain clients from time to time with dinners, etc. I only have healthcare with my employer and no other benefits and I am told they would continue to provide the healthcare. I invest in my own IRA with no employer benefits. I am trying to figure out if I will actually pay less taxes via more deductions (currently not deducting anything but the standard). I am also in graduate school part time on student loans with no employer assistance.
So theoretically, if I was previously salary of 75k I should ask for an increase to cover the extra self employment tax i will incur?

the line of work is construction / real estate development consulting.
I appreciate all of your input! It is all very helpful. Thank you.
Can anyone explain how this would change if I formed a Corporation instead?

I recently left my job to work for a different company. I signed an agreement with that new company to work as an independent contractor. They are reimbursing me for all my business expenses. This is my first time through paying (estimated) tax as an independent contractor.

I’ve been wading through IRS forms and instructions and a whole lot of jargon and have learned a lot about sole proprietorships, paying self-employment tax, etc. but don’t yet have a good understanding of what portions of what forms (e.g., 1040, Schedule A, Schedule C) I need to fill out to explain the money I’m receiving that reimburses my business expenses and what deductions I’m able to claim for these reimbursed business expenses (again, which portions of which forms).

Thanks in advance!
Ok, so on Schedule C, gross receipts are my fees plus reimbursed expenses, but then I subtract those expenses to report income on 1040.

What about deductions: do I report any reimbursed business expenses on Schedule A?

If I work for a corporation but have a side job (sole proprietorship) will I pay Self Employment Tax on just the sole proprietorship income? Thanks. Any suggestions as it comes to Self Employment tax (if I claim enough deductions can I get that down to a normal taxation)? Thanks a bunch!