How Do I Report Self-Employment Income?

This week we hear from Nick in Reisterstown:

Dear Alice,

I worked as a realtor last year for the first time and sold a few houses.  I just got a form 1099-MISC what do I do with this and do I have to pay taxes on all of it?

Nick

Dear Nick,

Individuals who receive 1099-MISC under most circumstances are considered self-employed and report the income and expense of their self-employment on Schedule C which is an attachment to the Form 1040.  Basically you can deduct any ordinary and necessary expense you incurred in order to earn the commissions you received.  For realtors, things like business mileage, business portion of cell phone, plus continuing education, licensing and dues are typical deductions.   You might also consider the home office deduction if you used a portion of your home regularly and exclusively to manage your realtor activities.

Check out my website, www.compassionatetax.com, for an article on business expenses under the resources tab for more detailed information about how to determine what’s deductible.  Good luck and congrats on your success. Hope this information is helpful.

Many Happy Returns!

Alice A. Reid, EA

Disclosure: The nature of taxation is complex and information used to complete your personal tax return is dynamic – meaning that one area of your tax return can affect others, while our goal is to provide you with good general information, IRS may require certain documentation or substantiation to support any tax position you take on your tax return.  If your issue is complex we recommend you talk to a tax professional who can better understand your entire tax situation and advise you appropriately.