Lesson 2 of 5
In Progress

Overview of Self-Employment

Collin Gabriel February 1, 2022

Marissa Danley (09:04):

So let’s go ahead and, and move on to self-employment. Um, which is what I am, which is what you are, which is what a lot of people are. Um, but the Iris was a very definition of what being self-employed is. So generally you’re considered self-employed if you carry on, and these are IRS definitions, if you carry on a trader business as a sole proprietor or an independent contractor, this also includes, um, LLCs. So LLC is in there too. Uh, you might, might be in a partnership. If you have a partnership that is intending to make some money, you have a business you’re self employed, um, you’re otherwise in business for yourself, including a part-time business. So this, you know, I, I saw a lot of this during the pandemic, people doing Instacart, people doing, you know, Uber driving, uh, anything, if it’s a parttime business, it’s still self-employment.

Marissa Danley (10:01):

If you are interested some night when you’re curious, as most people are, I know about tax law in the middle of the night, um, you can go to the IRS and take a look at the small business. <laugh> was so fantastic. What’s that? I just said that is so fantastic that, that you, that you put it out there like that when you’re, when you need to rabbit hole in the middle of the night, here you go. Yeah, there you go. I’m I’m there for you even in the middle of the night. Um, so there’s a, there’s a link. And when you get the presentation, you can go there. If you’d like to learn more from the IRS about small business, let, let’s talk a little bit more specifically about what types of income are considered self-employment. So when you’re self-employed, you sometimes have to give the person that’s paying you a w nine and you fill that form out and you put your name and your social or your employer identification number, um, and then come tax time.

Marissa Danley (10:59):

They send you what used to be a 10 99 miscellaneous, which is now a 10 99 N E C non-employee compensation. So they’ll send you that form and that form should have all the money that they paid you for the prior year. So those will go on your taxes. You may also have something called a 10 99 K, which we’re actually gonna talk a little bit more later on about, um, a 10 99 K comes from, um, basically online electronic sales. So PayPal, anything like that square as you take credit cards, it’s gonna from your credit card processing company. Um, so that will get reported to you as well as the IRS and by definition, money exchange for good or service is not reported elsewhere. And by that, I mean, there’s no minimum threshold. So a lot of times people say, well, let me back up. So money exchange for good or services, money means cash means a check means somebody gave you something and you did something for them.

Marissa Danley (12:05):

That’s self-employment a lot of times client. Well, I shouldn’t say a lot of times, but in the past people have said things to me like, well, okay, yeah. I have $10,000 on this, 10 99. And then I do the whole tax return and I get done to the end and I say, okay, any other income sources? And they say, well, yeah, I made $5,000, but that was under the table. So don’t count it. Um, it still has to count <laugh> so anytime that you have money, even if it’s under the table, it still gets counted. It’s not under the, table’s not a, um, technical tax term for reporting purposes. So there’s no minimum threshold. You make 20 bucks, you put it on your taxes. Um, that’s the technical thing here. A lot of times people don’t think that they need to put things on their, if they don’t get a tax form, um, the 10 99 NEC that I mentioned a minute ago, uh, those technically don’t have to be issued unless you earn 600 bucks. So you might not get one from somebody if they paid you, but, um, you’re still supposed to put it on your taxes. So there’s this spiel there.

Marissa Danley (13:16):

So now that we’ve talked about what is self-employment, um, let’s talk about, what’s not self-employment cause sometimes this does get a little bit confusing. So if you’re self-employed you don’t get a w two, you don’t issue yourself. The w two, nobody else has issues. You a w two at all. Um, so if you get a w two, it’s not self employment, you’re an employee. If you win the lottery, or if you gamble, you are not subject to self employment tax on those winnings, unless you’re a professional gambler, then we’re gonna probably refer you to somebody else, cuz I’m not a specialist in that area, but uh, generally not self-employment winnings gifts. If somebody gives you a gift, it’s not self-employment if somebody gives you a tip, it is so keep that in mind, gifts and tips are different things. Um, inheritance, if you inherit my property, it’s generally not self-employment if you inherit a business, potentially it is.

Marissa Danley (14:23):

So there is a little bit there, but for the most part, inheritance is not. And the same thing with investment income. Um, I had one client, little bit, little of a story. I had a client Y year, last year, I’ve been doing his taxes for probably years and he calls me up and he’s all, he’s all excited. He’s like Marisa, Marisa, Marisa. I started investing in Bitcoin and I’m going okay. All right. Okay. And, uh, so he sends me, he sends me over a hundred thousand transactions and I just, um, I didn’t cry, but I worked my way through it, but we had to have the discussion. Like if you have enough time to sit there and do that much Bitcoin trading, we might have a business income here, but anyway, little side note, um, Jan really investment income is not tax, uh, not self-employment.