J.K. Lasser's Guide to Self-Employment, 2nd Edition

CHAPTER 1 Being Self-Employed and On Your Own

1. What Does Self-Employment Mean?
2. Legal Consequences of Self-Employment
3. Practical Issues in Self-Employment
4. Tax Terminology
5. Being 1099ed
6. What's Ahead

Being self-employed is an awesome thing. You control your destiny and your earning potential is limitless. You can set your hours, subject to the demands of the project or activity you're working on. If you're an employee satisfied with your job, you can supplement your income with a side hustle. And, as a self-employed individual—full or part time—you can achieve a work–life balance that enables you to attend to your other interests and responsibilities. Be a mompreneur or dadpreneur. Care for an elderly parent. Take time to train for a marathon. Travel.

Of course, you have many obligations that come along with being self-employed. Whether your business makes or loses money, you have to report your income and expenses to the federal government if you are otherwise required to file a tax return. Depending on the state you reside in, you'll also have to report your business activities to your state.

In order to report your income and expenses, you need to understand how being self-employed affects your taxes. If you are just starting out in business and formerly were an employee, things are very different as a self-employed individual. Instead of receiving a W-2 from your employer telling you exactly what you must report as income for the year, it's now up to you to track what flows ...