We often get lots of questions asking what to do when you get Form 1099-MISC and you don’t own your own business, but you’re an employee of another company. Yet you get this form, what do you do with it?
The short answer is: if your Form 1099-MISC shows an amount in Box 7 for non-employee compensation and it’s because you did consulting work or other services for someone and you received compensation, you DO now have a “business”! You’re now technically self-employed and have to file Schedule C to report that 1099-MISC income. This is a requirement – even if you didn’t actually receive a 1099-MISC for the work you did!
The good thing about owning a business is the ability to deduct expenses related to your business while performing those services. Did you drive places during the course of the work you did? You can take a mileage deduction. Did you buy computer or office supplies to use during the consulting? Then you can deduct your office supplies or office equipment.
Remember that you’ll be subject to self-employment tax on your consulting earnings… which is basically the self-employed person’s equivalent of social security and Medicare tax that employers normally withhold from your paychecks on a W-2, but hopefully all of your deductible expenses will still save you money on your taxes.
Don’t worry about knowing these tax rules. TurboTax will ask you simple questions about you and your business and give you the tax deductions and credits you are eligible for based on your answers, saving you money for your business.