Self-Employed Tax Tips & Summer Jobs

Self-Employed Tax Tips & Summer Jobs

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Ah, summer – the time of year when some people dive into entrepreneurship. Whether it’s a summer job, a part-time gig, a side-hustle or a small business, you may be considered self-employed. If that’s you or someone you know, here are a few tips to help navigate your tax situation.

Know If You’re Self-Employed

If your income is from a business or service, for example, working as an independent contractor in sales, or a social media sensation to babysitting, housecleaning, gardening, and even being a freelance promoter, etc.; that type of income is self-employment income. Your self-employment income is reported on Schedule C or Schedule C-EZ, Profit or Loss from Business. However, you will be able to reduce the income you make by being able to claim business expenses, such as supplies, auto mileage, and cost of goods sold.

Small business owner recording packing product.

Withholding and Estimated Taxes

If you’re an employee, your employer withholds tax from your paychecks. If you are self-employed, you may have to pay estimated taxes directly to the IRS on set dates during the year. You are expected to pay estimated taxes if you expect to owe $1,000 or more annually.

All Income Must Be Reported

Although you can earn a certain amount of income each year without having to pay taxes or file a tax return, if you are required to file a tax return, all income you receive from any source should be reported on your return. That includes income from side jobs, self-employment, barter exchanges, and any sort of fellowship for which you perform services. If the net income after subtracting expenses is $400 or more you are required to file a tax return and pay self-employment taxes, which will be included as a part of your personal income tax return on Form 1040.

Woman using a calculator.

Under the American Rescue Plan, changes were made to Form 1099-K reporting requirements for third-party payment networks like Venmo and PayPal that process credit/debit card payments or electronic payment transfers. The change was to take effect with transactions starting tax year 2022  and lowered the reporting threshold by third party payment processors to over $600. On December 23, 2022 the IRS announced an initial delay and on November 21, 2023 the IRS announced another delay in reporting thresholds for third-party settlement organizations (TPSOs). As a result of this delay, TPSOs will not be required to report tax year 2023 transactions on a Form 1099-K at the lower amount of over $600. This means that for tax year 2023 (the taxes you file in 2024) the existing 1099-K reporting threshold of the aggregate of more than $20,000 in payments and  over 200 transactions will remain in effect. The IRS is currently planning for a threshold of $5,000 for tax year 2024 (the taxes you file in 2025) as part of the phase in to implement the lower over $600 threshold enacted under the American Rescue Plan. This change could impact people working in the gig economy, online sellers, independent contractors, and other self-employed business owners.

Barter Income

Sometimes you aren’t paid in cash and instead, you receive services or goods in exchange for your self-employment work. That’s called bartering, and you must report the fair market value of the goods and services you receive. For example, if you spend the summer tutoring your neighbors’ children and you receive a credit for the restaurant they own or a bicycle from the bicycle shop they own, then the value of what you received is considered self-employment income to you.

Young woman tutoring a boy.

Filing A Tax Return

If you can be claimed as a dependent on someone’s tax return, you’ll still need to file a tax return if your income exceeds the minimum gross income filing requirements, or if your self-employment income is $400 or more. Even if you aren’t required to file a tax return, you’ll still want to file if income taxes have been withheld from any income you had since you may get that money back or it could also generate a tax refund if you’re eligible for any of the refundable tax credits like the American Opportunity Tax Credit or the Earned Income Tax Credit.

Don’t worry about knowing these tax rules. You can easily track your business income, expenses, mileage, and figure out your estimated taxes year round with QuickBooks Self-Employed. At tax time, your information can easily export from QuickBooks Self-Employed to your TurboTax Premium tax return making tax filing effortless. TurboTax helps uncover industry-specific tax deductions saving you money on your taxes.

6 responses to “Self-Employed Tax Tips & Summer Jobs”

  1. This introduction should have mentioned the low income tax credit as a clear reason to file even if no income tax must be paid.

  2. I work for 2 gig employment companies. Ridesharing and food delivery that are 1099 companies in addition 5 different on-call security companies which all are W-2 employers. Auto miles, maintenance, wear & tear is heavily used and needed for all to be employed as well as cell phone necessities. How does one destinctly separate and yet use and or combine my multiple expense usage for tax purposes. Need help ASAP.

  3. I filed with yall last year and was spouse to get a refound around 2,200-2,400$ never got nothing but a letter on back taxes.what happend to the 2,000&something did it go thawerd the back taxe our what? I filed this year and havnt heard nothing with a taxe repersenteative .i got a son that hast got nothing but i-o,! I only make 1,200 to 1,800 those years. I started my on buisness this year, and this ant straighted out yet. I need dessprent help with all this if the other lady didnt do nothing. Thank You, Jonathan Gokden

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