Paying taxes is an undeniable fact of our lives. The truth is that there is no escaping it. As a 1099-MISC income owner, you must show proof of income for loans, insurance purposes, and U.S. taxation laws.
If you are a freelancer, the taxes you pay contribute towards Social Security and Medicare, any other taxable U.S. citizen. So, in this blog, you will have everything you need to know about calculating 1099 taxes.
What is a 1099-Income?
All self-employed individuals and income earners are required to pay taxes quarterly to the IRS. Every January, you should receive a 1099-MISC form in your mailbox for every company you worked for in the past year.
If you have worked for more than one organization in a calendar year, you can expect various 1099-MISC forms. Each form shall reflect an amount in Box 7. This is the total amount you were compensated by your employer, meaning you need to pay tax on this amount.
How To Fill Out A 1099-MISC Form?
The companies for whom you have worked for the whole year will total your earnings on every 1099-MISC form. Throughout the year, you should collect and track your earnings, either through paystubs or from employer.
To lower the amount of the tax that you pay, track your business expenses and hold onto receipts where you can. You must enter your business expenditure onto your 1099 MISC form to calculate your accurate taxable income.
How To Calculate 1099 Taxes?
If you are new to receiving a 1099 income, you may be familiar with the ins and outs of a 1099 form. Let us now break down this navigation.
Step 1: Total the income amounts of each 1099-MISC form. If you have more than one form, add the total income from all of your forms.
Step 2: Total all of your business expenditures you have been monitoring and subtract that from your total income.
Step 3: Multiply the net income amount by 0.9235 to calculate your taxable income.
Step 4: Checkout the IRS tax table for the amount of tax you owe for your taxable income.
How To File a 1099-Form?
In order to file a 1099- form, you will need to have the following documents:
Schedule C: This is where you will record your business expenses and calculate your generated profits.
1040-ES: This is an easy worksheet used to calculate your quarterly taxes.
Schedule SE: Document equals the Social Security and Medicare tax contributions you owe.
If you want to create paystub online, you can do it with Online Paystub, a 100% free tool. We hope all of your doubts must have been cleared from this blog about calculating 1099 tax.