How do I report my earnings on my taxes?

Taxes 101 for officers paid for details with Off Duty Blue

Background

Off Duty Blue provides software and an online marketplace that helps public safety organizations manage off duty detail scheduling and facilitates payments between the organizations requesting security and officers providing security. Whether you supplement your income by working details regularly, or just a few times a year, you need to understand the tax implications of being an independent contractor.

Officers are Independent Contractors


While officers find and apply for opportunities using Off Duty Blue’s officer portal, the organizations requesting security and the officers providing it agree to the terms of the services that are provided. Once the job is completed to everyone’s satisfaction, Off Duty Blue facilitates the payment between the parties. In this relationship, and as described in the company’s “Marketplace Agreement”, officers are not employees, but rather, independent contractors. Independent contractors control how, where, and when they perform their work, which takes place without direct employer supervision.

Traditional employment vs. independent contractor status

In traditional employment arrangements, the employer provides a W-2 form at the end of the calendar year, reporting to you and the IRS the amount of money you made and what taxes were withheld, such as Social Security, Medicare and income taxes.


Throughout the year, your employer takes these taxes out of your paycheck and sends the money to the IRS on your behalf. As an independent contractor you are both the employer and employee, so you are responsible for the timely payment of these taxes.

All the money you earn as an independent contractor must be reported on your federal tax return. Since Off Duty Blue is not an employer, it does not provide you with a W-2 form at the end of the year. However, the company is required to provide you Form 1099-K to you and the IRS if you:

  • Earn more than $20,000, AND
  • Work more than 200 details in the calendar year


Even if you don't receive a 1099-K, which most of you won’t since working details is not your primary source of income, you will not receive a 1099-K nor will your earnings be reported to the IRS. However, all income is reportable and you must still report your Off Duty Blue earnings. All officers that earn throughout the year will receive a year-end earnings summary delivered electronically to the email address on file with Off Duty Blue.


Each state has its own tax rules for independent contractors, so be sure to check your state's regulations or consult with your tax professional.

Business expense tax deductions


Use Schedule C (more than $5000 in deductions) or Schedule C-EZ (less than $5,000 in deductions) to report your Off Duty Blue income, as well as any business expenses related to that income. Business expenses are costs that are necessary solely as a result of your activity working security or traffic details.

The most common deduction made by officers is mileage incurred driving to and from details, but consult with your tax professional to make sure you’re making the most out of your deductions

The self-employment tax


As an independent contractor, you must determine and pay your own Social Security and Medicare taxes, using Schedule SE. Since traditional employers are required to pay half of these taxes on your behalf, you can deduct 50% of the total self-employment tax as an adjustment to your income.


Estimated tax payments


In some cases, taxes are payable to the IRS on income as you earn it, not just on the tax filing deadline in mid-April. As an independent contractor, you may be required to submit estimated quarterly payments of income and self-employment taxes.


Typically, estimates are not required if you did not have a tax liability in the prior year. That being said, determining if you should be paying estimates in the future would have to be evaluated on an individual basis as other items reported on your tax return would have to be evaluated as well. Please consult with your tax professional to determine if you should be submitting taxes quarterly based on your earnings.


If you and your tax professional determine that you should submit your taxes quarterly. Form 1040-ES helps you estimate the amount due each quarter. This way, you can avoid owing a large sum at tax time and possible late penalties, as well.