Working in the Gig Economy: Taxes on Self-Employment
Many military spouses – and even some service members – have started a business or side job in today’s gig economy. Being your own employer means responsibility for additional taxes and tax reporting.
The basics: There are two regular types of taxes paid by persons with self-employment income – regular income taxes (federal, and possibly state) and self-employment tax. Read on to learn more.
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Schedule C and tax filing
In most cases, self-employment income and expenses are reported on Schedule C. The net profit, after expenses, of Schedule C income is then reported on your federal tax return. It is the responsibility of the taxpayer to track all sources of income, even if the source does not report it to you or to the IRS.
In addition to regular income taxes on your profits, you'll also be subject to the self-employment tax. The self-employment tax is the Social Security and Medicare tax paid by those who are not employed by someone else. Anyone who has total self-employment income in excess of $400 per year is required to file a Schedule SE and pay self-employment taxes.
State tax filing
Military spouses may report self-employment income just like their regular income, using the state they are permitted to claim for purposes of taxation.
Non-military income of active-duty service members is not protected under the Servicemember's Civil Relief Act, and service members with income from sources other than the military must file with the state in which the income is earned.
Self-employment can bring tax questions. Military OneSource MilTax offers 100% free online tax preparation and e-filing software, as well as telephone consultations with a tax professional that understands the unique needs of military families. With MilTax, there are no hidden surprises.
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