Like many tax questions – it depends! If you are tutoring, whether or not you’re considered self-employed, you will have to do a lot with the specific arrangement. Let’s see what the different arrangements are and how it affects your taxes.
Are You an Employee, Contractor, or Independent?
The simplest arrangement is as an employee. If you are a tutor but working through a company, you’re most likely an employee. If you filled out the typical employee paperwork, such as a Form I-9, then it’s likely you’re an employee. You will have provided all the supporting documentation, like a driver’s license, passport, and/or birth certificate. You will receive a paycheck with the necessary FICA deductions too – which is a key distinction. In this case, you are not self-employed.
If your tutoring jobs are provided by a third party, you could be a contractor. The easiest way to find out is to ask but you can also tell by looking at your pay stubs. If the payments are flat or made on a per job basis, you might not have FICA deductions. If that’s the case, you’re a contractor, working on a per contract basis, through an agency or company and considered self-employed.
If you are working directly with students and they’re paying you directly, you’re self-employed. There is no “middleman” involved in the arrangement and no one is collecting FICA payments. You are providing tutoring services directly to your students, and they are making fee payments to you, and not to a third-party.
If You Are a Self-Employed Tutor
First and foremost, you will not have taxes taken out of your earnings like when you have an employer. There are three components to your income tax:
- Federal income tax
- FICA tax – called self-employment tax for the self-employed
- State income tax, if your state imposes one.
Taxes must be paid as the income is being made. With a regular job, your employer will withhold money from each paycheck to cover FICA, federal and state taxes. When you’re self-employed, you need to make estimated tax payments every quarter.
The estimates are due on a quarterly basis in April, June, September, and January of the following year. If your state has an income tax, then there will be a similar quarterly estimated tax payment schedule. In most states, the due dates are identical with the federal schedule.
Keeping Accurate Records
If your tutoring income is self-employment income, keep accurate records on your income and your expenses. It may help to set up a dedicated checking account, in which you will deposit all income payments received, and pay all expenses related to your tutoring business.
Don’t forget to include expenses! They can include any materials used for tutoring purposes, training materials, travel, and other costs associated with your business.
Travel can be one of the biggest expenses in your business. If you’re driving to and from students’ homes for tutoring purposes, you can deduct those expenses. The IRS allows you to deduct 53.5 cents per mile for business expenses for 2017. If you drive 2,000 miles in your tutoring business, that will result in an auto expense deduction of $1,070.
If you’re tutoring and are self-employed, make sure that you track all of your income and expenses. You can easily track your income, expenses, and mileage year-round and figure out and pay your estimated taxes with QuickBooks Self-Employed. After tracking your information, you can then transfer it into TurboTax Self-Employed at tax-time.