All payment amounts are listed in current (i.e., nominal, without inflation adjustment) United States dollars (USD).
Upward recording adjustment: 2017,480.00
Downward recording adjustment: 2016,480.00
For more information on taxes, learn about Form 1040 and Form 1099-MISC.
Pass the parameterincomeForTaxPurposes in the URL to change the income used below to an arbitrary amount (example); this will use the same amount for all years.
In the year 2017, the total payment awarded to you (your income) was $553.00 USD, and the total money paid to you was $73.00 USD. Your upward adjustment to income (for payments from tasks completed in previous years, that was finalized in 2017) was $480.00 and the downward adjustment to income (for payments for completed tasks in that year, but finalized in later years) was $0.00. Thus, the effective income for tax purposes from contract work is $553.00.
Here is a rough estimate for how much tax you would need to pay assuming all your income was from contract work for Vipul Naik:
More details of your tax situation and how to fill your tax forms are below.
If you are a United States citizen or resident for tax purposes, you need to file your tax return and pay self-employment tax (Social Security and Medicare taxes) on the income earned. You are above the filing threshold (92.35% of your income exceeds the filing threshold of $400). For more information on the filing threshold, see Self-Employed Individuals Tax Center and Form 1040, Schedule SE (PDF). The reason is that income earned through contract work is classified under self-employment income, and the responsibility for paying Social Security and Medicare taxes on such income falls on the worker rather than the payer. Approximate, highly conservative, guidance on what to do follows. This is just to give you a sense of how things should look; you should read through the forms and instructions competely to make sure it is correct for your situation.
Depending on your income and filing status, you may be eligible for an earned income credit (EIC), also known as an earned income tax credit (EITC). Since the EITC is complex to model, we do not include the value of the EITC in our calculations, and you're responsible for making the adjustments yourself. We do, however, have a gentle reminder when we get to the relevant lines in Form 1040, as well as heuristic guidance on what the value should approximately work out to.
Fill in the forms electronically (using your PDF reader) rather than by hand to make it easier to edit the forms and easier for the IRS to process your forms.
Start by filling Form 1040, Schedule C, Page 1 (PDF). In row F, select the Accounting method as "Accrual" -- this corresponds to using the "total payment awarded" which is what we use here; if instead you want to use "Cash" you must use the "total payment made" value, in which case you have to replace the number for all your calculations. Also, keep in mind that it is best to keep your accounting method consistent across years and across income sources, otherwise you run the risk of undercounting or double-counting income, and also attracting more IRS scrutiny.
In Part I and II, enter all your contract work income on lines 1, 3, 5, 7, 29, and 31. If all your contract work income was from Vipul Naik, and you are using the "Accrual" method, the amount will be $553.00 USD. The remaining entries in both parts should be zero or blank. Do not fill in Page 2. Attach only Page 1 to your tax filing.
Now go to the main Form 1040 (PDF). the data for lines 1 through 6 based on your knowledge. If you are single and nobody is claiming you as a dependent, you should have 1 total exemption claimed in line 6d. For line 7, enter your total income from regular employment (this should be 0 if all your income was from contract work). Enter your contract work income on line 12 (which equals $553.00 if contract work for Vipul Naik was your only contract work).
Now switch to Schedule SE (PDF). Fill Page 2, Part I (leave Page 1 and Page 2, Part II blank). Your contract work income will go in lines 2 and 3. Follow the instructions carefully. The end result on line 12 should be about 14.13% of your contract work income, which should work out to $78.14 (there are some edge cases where it's less, but these probably don't apply to you). The value on line 13 should be half of the value on line 12, which should work out to $39.07.
Return to Form 1040. For line 27, enter the same value as on line 13 of Form 1040, Schedule SE, which in turn is half of the value on line 12, and should work out to $39.07. The same value will likely go into line 36, assuming none of the rest of the adjustments apply to you.
Assuming you had no other income in 2017, since your income minus the deductible part of self-employment tax was less than the standard deduction of $6,350.00 USD, you do not need to pay income tax, and line 56 should be 0.Now return to Form 1040. Fill in line 57; this should match line 12 of Schedule SE, which is $78.14. The total on line 63 should be the sum of your income tax (as calculated on line 56) and your self-employment tax (as calculated on line 57). This total will be $78.14 if you are taking a personal exemption (i.e., you are not being claimed as a dependent), and $78.14 if you are not taking a personal exemption (i.e., somebody else is claiming you as a dependent).
If you have made estimated tax payments (using Form 1040-ES by mail or through EFTPS), or if you chose a credit elect last year, you need to enter the total amount applied from last year plus your estimated tax payments on line 65. If you paid an additional amount with your request for extension to file, enter that on line 70. Enter the total on line 74.
Now follow the instructions to fill in the rest of the form. Depending on which of line 63 and line 74 is bigger, you are either owed a refund or need to make a payment. If you are owed a refund, you can either ask for it right away or have it apply to next year's taxes. If you owe money, there is a possibility that you may also need to pay an estimated tax penalty, but if you aren't sure how to calculate this penalty, you can leave it blank and let the IRS reach out to you if they need you to pay a penalty.
If you are using a tax compliance software instead of filling the forms yourself, then check if it gives you an option to add in income for self-employment or contract work. Some softwares may not allow you to enter the numbers directly. To get around this problem, you may need to enter it in as if it is a Form 1099-MISC, even though you will not receive a Form 1099-MISC. That is because Vipul Naik is paying you personally rather than in the course of a trade or business, but tax compliance softwares may not have personal payments as a prominent enough use case to cover.
In the year 2016, the total payment awarded to you (your income) was $-416.00 USD, and the total money paid to you was $64.00 USD. Your upward adjustment to income (for payments from tasks completed in previous years, that was finalized in 2016) was $0.00 and the downward adjustment to income (for payments for completed tasks in that year, but finalized in later years) was $480.00. Thus, the effective income for tax purposes from contract work is $-416.00.
Here is a rough estimate for how much tax you would need to pay assuming all your income was from contract work for Vipul Naik:
More details of your tax situation and how to fill your tax forms are below.
You had self-employment income for the year 2016. However, assuming that all your self-employment income was through contract work for Vipul Naik, you do not pass the threshold for filing and paying taxes. Specifically, 92.35% of your income was less than the threshold of $400. For more information, see Self-Employed Individuals Tax Center and Form 1040, Schedule SE (PDF) (Page 2, line 4c). You are also below the minimum threshold for paying income tax.