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My wife and I do some residential and commercial cleaning for extra money. We don't have it set up as a business. It totals up to $840 a month and has been steady the past 3 years. In the past I never reported this on our taxes as it was usually paid in personal checks or cash. We are looking to buy our first house late 2014/early 2015 and want to make sure this money is counted towards our income starting this year. What is the best way to report the money on our taxes this year so it will be taken into account when shopping for a mortgage? Thanks.
I'm not a tax advisor but have been self employed most of my career.
You'd use a Schedule C for self-employment income and a Schedule SE to calculate any socal security taxes due. You don't have to set it up as a separate business unless you want to. A sole proprietorship with the income reported under your and your wife's names and ss numbers should be enough. You just add these forms to your regular 1040 filing. It's not complicated.
You also use the Schedule C to take deductions for your business expenses.
Again, if you have questions or you have a state income tax where you are, you should check with a real tax advisor on details. But mostly, for the IRS, it's pretty simple.
In order for the income to count the lender will want to see two years of reported income. That means filing taxes on this additional income for 2012 and 2013.