- and foremost, you are a business
So that means there’s lingo to learn and best practices to consider. Start thinking about things in terms of REVENUE (that’s taxable money coming in, payments from the vendor you are working for) and EXPENSES (ordinary and necessary business deductions). Revenue minus expenses equals NET INCOME(“net” meaning after expenses). Note that a Draw/Owner Distribution, is not considered a deduction, that’s just you taking your own money. It all sounds like a no brainer, but I promise taking the time to memorize these words will help when it comes to preparing your own tax return, or speaking with a tax preparer.
2. Keep good records!
Business income can be reduced by business expenses, so keep good records! Just like any other business, if you are incurring expenses, and these expenses are ordinary and necessary for the purpose generating revenue, then they are deductible and will reduces your overall business income.
3. You’re subject to self-employment taxes
Income, whether you are paid in USD or crypto, is subject to self-employment tax and is reported on Schedule C (assuming single member LLC or sole proprietor).