When you're self-employed, your earnings are not the same thing as Other Income. Self-employment income is anything you earn as part of conducting your business. Other Income is a catch-all for money made outside of this regular operation. Although both types of earnings will incur income tax, other income is not subject to any self-employment tax whereas employment income will.
What is Self-Employment Income?
People who worked as contractors, freelancers, or that engage in side hustles will generally receive one of two documents from the businesses they work with:
- 1099-MISC (Miscellaneous income)
- 1099-NEC (Non-employee compensation)
Usually, before a business will issue one of these 1099 tax forms, they will require you to fill out a W-9 providing them with all of your tax-relevant information.
Earnings that are generated as part of conducting regular, long-term business are subject to self-employment tax.
What is Other Income?
The IRS defines Other Income as any income that does not have its own line on Form 1040. This type of income is not subject to self-employment tax if it is not regular and is done so without the intent to generate profits on a long-term basis.
A few examples include:
- Gambling winnings
- Hobby income (from an activity not performed for profit)
- Nonbusiness rental income (earned from renting personal property)
- Prizes and awards
- Stock options
For a complete list including more examples, visit the IRS website.
Generally speaking, other income is uncommon and not typically something that most people will need to report.
How Do I Report Other Income?
Other Income is reported on Form 1040 Schedule 1.