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Thread: Freelance coding and the IRS
12-02-2009, 04:06 PM #31
- Join Date
- Apr 2007
- Quakertown PA USA
- Thanked 125 Times in 123 Posts
Based on your explanation:
You are correct that you will not be subject to British taxes, but will be subject to US taxes.
There is no need, whatsoever, for you to form any sort of company for this activity, it's perfectly legal to earn this money as an individual. It would not be legal, however, to treat this income as dividends. This is compensation for your time and efforts and, as such, is subject to Self-Employment tax reporting (the equivalent of Social Security).
You can treat this as 'Other Income' reporting it on line 21 on Form 1040 (unless they renumber the lines this year), but you will also have to include Schedule SE, to report the self-employment income and pay the related tax.
While I can see this increasing your tax preparation bill, I can't see it doubling the cost. If so, you need to find a new preparer as it will require only 2 additional items of data-entry and their software handles the rest.
FWIW, I am a tax advisor (for over 30 years). However, I must state that you cannot legally rely on this advise as I have not met with you and discussed this matter in depth.John
12-03-2009, 12:25 PM #32
- Join Date
- Dec 2009
- Thanked 0 Times in 0 Posts
Thank you for your quick reply.
Good to know that I do not have to form some sort of company in order to do this. I am OK with it increasing my tax preparation bill a bit (sort of expected that), but was just worried that if I had to create a company to receive money like this, that would lead to a whole separate tax preparation.
I dont think my tax guy would double the cost for a couple extra lines on my return. Once I have confirmation that the pay is really going to happen, I will give him a call to see how he thinks I should handle it..