Tax Answers for Work at Home Moms

Unless you are a super genius, have a degree in accounting, or worked for the IRS, taxes may seem like a whole different world to you, and they are even more confusing when you work from home. There are many questioning moms out there that just need a few answers to know what to do, and no question should go unanswered. So, these most frequent questions and their answers should help you when thinking about your taxes:

How Much Do I Have to Make to Claim My Money on Taxes?

When you are an independent contractor, you may work for several different companies doing one or two projects here and there. If you make under $600 a year from one particular company, the company is not obligated to report it. But, once you exceed $600, the company is obligated to send a 1099 form to the contractor as well as the IRS.

What are the Differences Between and Employee and an Independent Contractor?

If you are an employee, you work for a company or organization which has the authority to dictate exactly what you do and how you do it. However, if you are an independent contractor, the person who is contracting you pays only for the result of your labor. This means it doesn’t matter how the work gets done just so long as you do what they asked.

What Taxes Do I Pay When I Work From Home?

Each state is different when it comes to state taxes; therefore, you should contact your local government to find out what state taxes you are responsible for. If you exceed $600 you will probably have to pay a self-employment tax. Of course, you will have social security, Medicare tax, and tax on your earnings which is about 15% of your earnings each year, but be sure to talk with a tax professional for more accurate information.

Do I Get Any Deductions?

You can get many different deductions as a sole proprietor. You can deduct all your expenses, a portion of your rent, office supplies, travel expenses, and anything that was necessary to get income from your contracts. You can even get deductions that an employee could get such as the charity deduction. Just because you work from home, doesn’t mean you don’t get any tax breaks.

How Do I File my 1099 Income?

When you file your taxes as an independent contractor with a 1099, you will use the 1040, schedule C form. The schedule C will allow you to record you income and your expenses as a sole proprietor. If your expenses did not exceed $2500 you can use the Schedule C-EZ form.  Be sure to always claim your income when you file your taxes especially if you received a 1099.

It is important to find the answers to your questions before you do your taxes. When in doubt, always talk to a tax professional that can help you answer any questions or concerns you may have.

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