Form 1040 (Schedule A&B: Fill & Download for Free

A trade or business has been defined as “holding one’s self out to others as engaged in the selling of goods or services.” (Deputy v. du Pont, 308 U.S. 488 (1940), Frankfurter, J., concurring).The IRS Web site[1] defines it as “an activity carried on for a livelihood or in good faith to make a profit.” Revenue Ruling 58-112 further characterizes a trade or business activity as one that is regular, frequent and continuous. The regularity of activities and transactions and the production of income are important elements.If the income is reported on a 1099 Misc as non-employee compensation, it will be presumed to be self employment income unless you can show that the activity is not regular and ongoing.Some examples:An assistant professor coauthored a book without any obligation to later work on revisions. The fact that she did revise the textbook five years later did not matter (Langford v. Commissioner, TC Memo 1988-300).A man created and patented inventions in his spare time (Levinson v. Commissioner, TC Memo 1999-212). The Tax Court held that he was not in the business of inventing because he did so only sporadically.A corporate officer received a fee for negotiating an isolated sale of all the company’s stock. He did not regularly hold himself available to the public for negotiations (Revenue Ruling 58-112).A man participated in a clinical drug study for which he was paid a lump sum. His intent was to receive treatment for asthma (Private Letter Ruling 9106004).If you truly only did this odd job once and have no intention of continuing this activity then you report it on Form 1040 Schedule 1 Line 21.If this is not a one time job and you will regularly participate in this activity, even if only sporadically with the intent to make a profit, then you report it on Schedule C.Footnotes[1] An official website of the United States government

Hi Mohammed, good to hear from you again. I believe that you are asking how to reduce the tax on that income that was reported on form 1099. This covers a lot of territory as the various iterations of form 1099 can report anything from pension benefits to payments to independent contractors. I'll try for the one that I believe it is. Payments to a person who did work but is not an employee are reported on a 1099-Misc. If this is the case, familiarize yourself with schedule C. On this form you are reporting income listed on form 1099, or possibly several of them, as income from a business that you engaged in. You will be able to deduct any costs of doing business such as vehicle mileage, tools, electricity, and any other legitimate expenses incurred. We don't pay income tax on the gross receipts, we are taxed on the net profits. Upon completion of schedule C, you will arrive at the actual profit that you made from your endeavor and this is the amount that will transfer to the income section of your 1040 to be assessed income tax. It will also transfer to schedule SE for assessment of social security and medicare tax of 15.3%, Now, in case this sum reported on your 1999 is something else, ranging from PhD stipends to savings interest, the same basic rule applies. If you incurred allowable costs in earning this money, you will be able to deduct those costs before the income is taxed. The method of doing this and the forms involved will vary depending on how you came by this money, but if you incurred expenses to earn it, there will be a way to deduct those expenses. Let me know what version of the 1099s this is and what sort of income and I'll try to explain in more detail.