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This year I pay taxes on income earned in 2018 for freelance work I did for a foreign company. According to the IRS, because this was my first year, I didn't have a previous years income for quarterly tax estimates, therefore I didn't need to file quarterly self-employment taxes. They told me over the phone, reading directly from the IRS form.

My questions:

Do I need additional forms to file this income?

How do I deduct expenses incurred while self-employed?

Any suggestions to how to file effectively?

Thank you.

Brett

  • It might be worth a few dollars to have a CPA get you set up in the right direction, direct you to the proper forms, identify the items you can deduct as business expenses, learn the pitfalls to avoid, etc. Also, since the tax laws have changed recently, a CPA would have more current information. But there may be business owners on here who could speak from experience. – Adam Klump Feb 1 at 2:32
  • Did you have any income in 2017? – mhoran_psprep Feb 1 at 17:30
  • I won't use a pay service. @mhoran_psprep: I didn't have U.S. income in 2017 because I was living outside of the country. – BrettA Feb 1 at 21:12
  • Are you a US Citizen? – mhoran_psprep Feb 1 at 21:23
  • @jamesqf - that's fair enough then! I deleted the comment.. – Fattie Feb 1 at 22:43
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Caveat: The following was true for 2017 taxes. I haven't done 2018 yet, so I don't know if there are significant changes. As usual, your best bet is to read the IRS instructions.

You will need to file Schedule C to deduct your expenses. There are a number of other forms that you might want to file with this, such as (IIRC) Form 8829 if you deduct expenses for use of your home.

That will give you net profit from your self employment. You need to use that on Schedule SSE to figure your Social Security & Medicare tax.

Also, since your work was for a foreign company, you might have had tax withheld by them. (For their country, not the IRS.) There is a foreign tax credit, and more deductions if you spent time in the country - though it's been long enough since I did so that I've forgotten the form number.

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    The main TCJA change for this area is that sole proprietors, along with passthroughs (partnership, LLC treated as disregarded or partnership, S-corp), now get a 20% deduction for Qualified Business Income up to $315k joint / $157.5k other and possibly more; this is explained in some detail in the 1040 general instructions. There are also (more) restrictions on meals and entertainment, which I'd generally not expect to affect remote contract workers. – dave_thompson_085 Feb 1 at 22:07
  • @dave_thompson_085: Do I need to register my business or as "self-employed ownership" in order to benefit for the 20% deduction for Qualified Business Income ? Gratefully. – BrettA Feb 4 at 21:17
  • @BrettA: if you are a sole prop, as I and jamesqf both assumed, that is one of the statuses for QBI. See the new-for-2018 line 9 instructions (also available in PDF, go up two levels) and if necessary the reference to pub 535 (under irs.gov/publications ). – dave_thompson_085 Feb 5 at 6:37

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