Jim Puzzanghera reported in today’s Los Angeles Times that, “Filing tax returns is difficult enough for typical workers, who start with the relative simplicity of the standard W-2 form issued by their employers.
“But the fiscal rites of spring are even more complicated for people who work for themselves or have a business on the side that generates extra income.”
Mr. Puzzanghera pointed out that, “Recently they’ve been joined by independent contractors in the so-called gig economy, such as Uber drivers, Amazon delivery people and homeowners renting out space on Airbnb.
“They’re all part of what’s become known as the 1099 economy, for the Internal Revenue Service form showing payments to workers who are not employees.”
Today’s article added that, “Recipients of 1099 forms must take additional steps in calculating their incomes and figuring out their tax payments, including deducting eligible expenses.”
The L.A. Times article, which proceeded in a “Q and A” format, also noted: “Payroll taxes that cover Social Security and Medicare usually are split between employers and employees. But that’s not the case with independent contractors, who must pay a self-employment tax. What are the tax implications?
“You pay half (the payroll taxes due) and you get a credit for half of that as an adjustment to your income. So you do get a little sympathy from the IRS for the half of the taxes that you’re paying. What’s really important is that you are keeping track of your expenses. Anything related to generating that income can be used to offset that income. That will bring down your gross income and bring down your Social Security and Medicare taxes.”
