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Level 12

How do I know if I'm Self-Employed?

Do you work for yourself? Do you own a business? If so, the IRS considers you to be "self-employed."


Maybe you don't consider a side-job to be a business, but any activity that you pursue with the intention of making a profit makes you self-employed. The full list of criteria are:

  • intend to make a profit (even if you operate at a loss)
  • have regular transactions or production of income
  • work on your business every day.


Consider yourself to be in business if you're an individual who:

  • is the only owner (the "sole proprietor") of an unincorporated business
  • works as an independent contractor, consultant or freelancer
  • is a member of a business partnership
  • owns all or part of a limited liability company (LLC)
  • earns income through investments (not just dividends or interest)
  • earns income through rental property


When you’re self-employed, you’ll receive a 1099-MISC or a 1099-K from the person or business that paid you.


But even if your customers don't send you a 1099, you’re still responsible for reporting all your income on your tax return. Fortunately, you can also deduct your business expenses to lower your taxes. Self-employed business activity is reported on Schedule C.


Also remember that self-employed individuals pay Self-Employment Tax on their business income. SE Tax represents both the employer and employee portion of Social Security and MediCare. You will receive credit for half of your SE Tax, but not until you file your tax return.


Estimated taxes are a way of life for self-employed taxpayers. When you start making a profit, consider pre-paying estimated taxes every quarter. This will help cover any taxes you owe on your business income when you file your return.


Bottom line: If you suspect that the income you receive could be from self-employment, it probably is. Keep good records and stay organized. You'll be more profitable and Tax Day won't hold as many surprises.


Have you received Form 1099-MISC for a job you didn't think was self-employment income? Add your story below!

1 Reply
Level 8

How do I know if I'm Self-Employed?

My (retired) spouse babysits on rare occasions at the local gym for people working out. This is not often, only on occasion.


Last year, she made less than $600. This surely can't be a business, can it?


The gym gave her a 1099-MISC with the amount in box 7, so TurboTax is forcing her to file as self-employed - but this is not a business!


What can we do?