Can I choose how to report self-employment income?

Can I choose how to report self-employment income? I'm taking a couple of years off from full-time work while my children are young. Last year, I earned about $7,000 as a freelance writer. Can I claim the $7,000 as miscellaneous income on a joint tax return with my wife, or must I file as a self-employed individual? Do I have a choice?

No. The "other income" category is designed to capture things such as jury fees and gambling winnings, not earnings from a sideline business. You need to file a Schedule C to report your freelance income and claim any deductions to offset it. The net amount carries over and is taxed on your joint return. You will also need a Schedule SE to pay the 15.3% self-employment tax on your net earnings.

However, you'll be able to deduct your business expenses, such as the cost of business equipment, phone calls, and mailings, and half of the self-employment tax you pay is also deductible.