You are now considered, (rightly or wrongly), an "independent contractor", a "self-employed" person whose "business" involves providing roadside assistance to motorists. Accordingly, you will enter all your "business" income on Schedule C - "Profit or Loss From Business (Sole Proprietorship)" - and from that income you will deduct all your "business" expenses. Your business' "bottom line" will flow up to line 12 - "Business income or (loss). Attach Schedule C or C-EZ" - of your Form 1040 to be taxed at regular income tax rates.
Your business' "bottom line" will also flow to Schedule SE - "Self-Employment Tax" - where Self-Employment Tax, (Social Security and Medicare), will be calculated at roughly a 15% tax rate. One half of of this tax will flow up to line 27 - "Deductible part of self-employment tax. Attach Schedule SE" - of your Form 1040 as a deduction in coming to your Adjusted Gross Income. The full amount of this tax will flow to line 57 - "Self-employment tax. Attach Schedule SE" - and become part of your total tax liability for the year.
I'd advise you to keep very careful records of all your mileage as well as all you car-related expenses like gas, oil, repairs, etc. When it comes time to fill out your Schedule C you have the choice of deducting mileage and the per mile rate or "actual" expenses.
In order to fill out Schedule C using TurboTax you'll need to use the most expensive online version, currently called TurboTax Self Employed. You can use a cheaper version if you elect to install TurboTax on your own computer as all desktop versions support Schedule C. However, you may opt to use the most expensive version here, too - currently called TurboTax Home & Business - as it gives you the most extensive "self employed" interview.
One other consideration: because you will not have taxes withheld from your income you might need to start making quarterly estimated tax payments.
Tom Young
