Whether you're a teacher who helps students brush up on their basics on the weekends, a college student who earns extra cash by lending your expertise to your classmates or a full-time self-employed tutor, you're engaged in a business activity, and the Internal Revenue Service requires you to pay taxes on your income.
If you work for a tutoring company, the company should either withhold taxes from your pay, which is rare for tutors, or send you a form 1099 at the end of the year reporting the amount paid to you. For your freelance work, though, your tutoring clients probably won't issue a 1099 declaring their expenses for your services. However, the IRS still requires you to report all income you receive on your Form 1040 on Line 12, business income or loss, using Schedule C or Schedule C-EZ, as appropriate, to document your earnings. After tracking your yearly receipts for your services on the Schedule C or C-EZ, transfer that figure to your 1040. This amount is included in your gross income, and you'll need to pay income taxes on it.
If your annual net earnings for your tutoring service exceed $400, as of August 2011, you must also pay the self-employment tax on your earnings. Because Social Security and Medicare taxes aren't withheld from your tutoring earnings – unless you're a traditional employee – the self-employment tax equals the employee's and the employer's share of FICA taxes. The current rate of the self-employment tax is 15.3 percent. Even if you only moonlight as a tutor and hold another full- or part-time position, you owe self-employment taxes on your tutoring earnings as well as any other earnings from self-employment.
If you tutor your clients in their own homes or another location, you may be eligible to make mileage deductions based on the distance you drove while working. While the IRS doesn't allow you to claim mileage between your home and the first and last places you visit with tutoring clients, you may claim mileage on all trips between clients' homes. To claim a mileage deduction -- which was 56.5 cents per mile for business purposes in 2013, and 56 cents per mile for 2014 -- keep records of your tutor-related driving, recording the date of your trips, the odometer reading when you start and arrive at each place, and a description of the trip. You may claim transportation deductions on Schedule C or C-EZ.
Estimated Taxes and Adjusted Withholdings
When you owe income and self-employment taxes on your tutoring earnings, the IRS requires you to make estimated tax payments on your earnings, filed quarterly using form 1040-ES. If you also have a traditional job with tax withholding, you can adjust your withholding by submitting a new W-4 to your employer, instructing it to withhold an additional amount to cover your tax liability from tutorong. Compute your additional withholding by calculating your income and self-employment taxes on your tutoring earnings and dividing that figure by the number of paychecks you receive each year.
- "Kiplinger"; Reporting Self-Employment Income; Kimberly Lankford; February 2006
- IRS.gov: Self-Employed Individuals Tax Center
- Small Business Administration: Employment Taxes for Employers and Self Employed Individuals
- Bankrate; Self-Employment Tax Considerations; April 2005
- IRS.gov: Tax Guide 2010
- IRS.gov: Form 1040 (Schedule C-EZ)
- IRS.gov: Form 1040 (Schedule C)
- IRS.gov: Form 1040-ES
- IRS.gov: Form W-4