As you think about your 2013 taxes, here are a few pointers on that ‘extra income’ that you may think the IRS doesn’t know about. You may have to think again!
Like many Americans you may have felt the income pinch in the last year, or you may be doing freelance work to get ready for a job change. If you’ve been paid for work that is outside of a regular W2 job, you have ‘Extra Income’.
Do you have to pay taxes on Extra Income? Yes, definitely.
Are taxes typically withheld from side income? Sometimes, but not always.
If taxes aren’t taken out of your check, do you still owe them? Yes!
There is a tax impact from Extra Income:
- If you are a part-time employee who has taxes taken out from your check, at tax time you will receive a W-2 form, showing the taxes that have come out of that income.
- You may be considered an Independent Contractor, and then no taxes would be taken out of your earnings. If you earned more than $600 from a job, then you will then receive a 1099-MISC form at tax time, showing that the IRS knows that you made that money. (And the IRS wants the money due to them.)
In other words, if you have a job that has not had taxes already withheld on that income, then you are obligated to make those tax payments yourself. As in, write a check to the IRS on a quarterly or annual basis. Tip: It’s a good idea to put a percentage of the earnings from that job into an account and save it for paying taxes, or you may not have the money when tax time rolls around!
For help with these and other tax issues, visit: www.millertaxlaw.com a Litchfield County, Connecticut tax attorney, admitted to practice in CT, NY, and before the US Tax Court. We accept state tax problems for CT, MA and NY, and we accept U.S. federal tax problems from any location in the world.