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I had a full time job in 2000 and received a W-2 from my employer. In 2000, I also did some miscellaneous computer consulting on the side for another company. I received a 1099 for that income ($8,000).

My question is this: Can I avoid paying self-employment tax on my 1099 income because I am technically not self-employed--I am employed full time by another company.


Ah, but you are technically self-employed. There's no law that says you can have only one job. Lots of people have side jobs that constitute self-employment. You're clearly one of them.

Also, I did not earn the consulting money on a regular basis. I earned about half of it in January 2000 and the other half in September. If I list the $8,000 as miscellaneous income on my 1040 and not compute SE tax, will I get a letter from the IRS?

I should certainly hope so.

Don't forget to deduct your expenses, if any, associated with the self-employment on Schedule C. Also, you can still make a Simplified Employee Plan (SEP) retirement contribution of up to 13.something percent of your net income from self-employment. Details are in IRS Publication 560.

TMF ExRO
Phil Marti
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