What Counts as 1099 Income
Independent contractors and self employed individuals must report all income earned through their business activities. This includes income reported on 1099 forms as well as income that does not appear on a form.
Important points to understand:
- All income is taxable, regardless of amount
- Income under six hundred dollars must still be reported
- Cash payments are taxable income
Failing to report all income can lead to penalties and IRS notices.
Common 1099 Mistakes That Cause Problems
Independent contractors often make avoidable mistakes, including:
- Underreporting income
- Failing to track expenses
- Missing quarterly estimated tax payments
- Not setting aside funds for self employment tax
These mistakes can result in unexpected tax bills and cash flow issues during tax season.
Common Deductions Independent Contractors Should Track
Independent contractors may be eligible for deductions such as:
- Home office expenses
- Mileage and vehicle costs
- Tools and equipment
- Software subscriptions
- Advertising and marketing
- Professional services
- Business insurance
- Education related to the trade
Maintaining detailed records and receipts is essential to support deductions.
Preparing for a Smoother Tax Season
Using accounting software, tracking expenses consistently, and working with a professional tax preparer like BD Tax LLC helps ensure compliance and reduce stress.