Reporting Self-Employment Income

As my full-time job, I work as an employee of a sporting-goods store. But last year, I started writing a monthly column for my local newspaper. I just received a 1099 from the newspaper reporting my income for them for the year (they hadn't withheld any taxes throughout the year). How do I report this on my taxes?

You'll report this self-employed income on Schedule C when you file your 2005 taxes, or you can report it on the simpler Schedule C-EZ if you had business expenses of $5,000 or less, had no employees and aren't taking the home-office deduction.

You'll also have to submit Schedule SE, where you calculate your self-employment tax. That's the biggest downside to having self-employed income. When you're considered your own boss, you have to pay both the employee's and the employer's share of your social security and medicare taxes on the freelance income, which adds an extra 7.65% to your tax bill.

From just $107.88 $24.99 for Kiplinger Personal Finance

Become a smarter, better informed investor. Subscribe from just ~~$107.88~~ $24.99, plus get up to 4 Special Issues

CLICK FOR FREE ISSUE

https://cdn.mos.cms.futurecdn.net/flexiimages/y99mlvgqmn1763972420.png

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

The good news, though, is that more of your expenses are tax-deductible. You'll be able to write off any business-related phone calls, mailings, equipment, travel and maybe even the cost of a computer and printer you use for your freelance work. For more information, see IRS Publication 525 Business Expenses. You might also be able to deduct your home-office expenses -- a portion of your rent or mortgage interest, homeowners insurance and utilities -- if you use an area in your home exclusively for your business. For more information, see IRS Publication 587 Business Use of Your Home.

When you have freelance income, you also can make tax-deductible contributions to a self-employed retirement plan, such as a SEP, an individual 401(k), a SIMPLE or a Keogh. See Do-It-Yourself Retirement Plans for more information about your options.

In the future, you should file quarterly taxes in the future because the newspaper isn't withholding any taxes from your paychecks. The IRS's page on paying estimated taxes explains the rules. For more information about self-employed tax filing in general, see Freelancers, Meet Schedule C.

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.