1099 Independent Contractor

   / 1099 Independent Contractor #1  

RoyJackson

Rest in Peace
Joined
Nov 17, 2001
Messages
23,144
Location
Bethel, Vermont
Tractor
John Deere 4052R Cab,, Deere 855D UTV, Z920A Zero Turn Mower and assorted implements
I've been offered a job as an independent contractor. Although I've done a fair amount of contract work over the years, I was always an employee (for payroll and tax purposes) of the agency.
This will be my first time as an independent. I'm doing some research (online) but would also like some experiences of folks who have done this kind of work.
Although the rate (hourly) is quite good, if the added expenses/taxes of being "independent" cut into the gross too much, it won't be a worthwhile endeavor for me.

So, any of you guys ever worked as a 1099 contractor?
If so, what are the pitfalls? The advantages?
A little more info: my work schedule would be set by the agency which, in turn, is contracted to the client.
 
   / 1099 Independent Contractor #2  
I've been offered a job as an independent contractor. Although I've done a fair amount of contract work over the years, I was always an employee (for payroll and tax purposes) of the agency.
This will be my first time as an independent. I'm doing some research (online) but would also like some experiences of folks who have done this kind of work.
Although the rate (hourly) is quite good, if the added expenses/taxes of being "independent" cut into the gross too much, it won't be a worthwhile endeavor for me.

So, any of you guys ever worked as a 1099 contractor?
If so, what are the pitfalls? The advantages?
A little more info: my work schedule would be set by the agency which, in turn, is contracted to the client.

Roy...see if the company or person hiring you minds paying your Subchaper S corporation instead of you personally...With a Sub S corp. you are able to write off expenses against whatever you are paid and only pay taxes on the bottom line by filing a K-1 form instead of a schedule C...you can set a salary for yourself and only that salary is subject to Social Security...the balance of the profit you would pay at a lower rate since it would be return on investment . I am not an accountant so check with yours or Google ...sub S corporation...there is a workaround to just being an independent contractor.
 
   / 1099 Independent Contractor
  • Thread Starter
#3  
Roy...see if the company or person hiring you minds paying your Subchaper S corporation instead of you personally...With a Sub S corp. you are able to write off expenses against whatever you are paid and only pay taxes on the bottom line by filing a K-1 form instead of a schedule C...you can set a salary for yourself and only that salary is subject to Social Security...the balance of the profit you would pay at a lower rate since it would be return on investment . I am not an accountant so check with yours or Google ...sub S corporation...there is a workaround to just being an independent contractor.

Thanks for the post!! I thought about an S corporation a while back, but my agency wasn't willing to go that route (I had to be an employee). Definitely something I want to research and consider.
 
   / 1099 Independent Contractor #4  
You will have to pay quaterly and pay double the usual SS tax. I think you would be a K-1 employee IHHO.You would also pre pay city and state taxes.
 
   / 1099 Independent Contractor
  • Thread Starter
#5  
You will have to pay quaterly and pay double the usual SS tax. I think you would be a K-1 employee IHHO.You would also pre pay city and state taxes.

I already knew about the taxes.
I'm not familar with the term K-1 employee. Care to elaborate?
 
   / 1099 Independent Contractor #6  
I already knew about the taxes.
I'm not familar with the term K-1 employee. Care to elaborate?

Roy - K-1 is a form that you file if you are taking profit as a dividend from your Sub S corporation...so as an independent contractor you would be like a sole proprietorship...you would file a Schedule C and list all your work related expenses and you would pay both sides of Social Security as I remember but again, I am not an accountant but I have been through this for my own account. Sub S Corp . is the way to go if you can get them to agree...otherwise just list out " all " of your expenses on the schedule C...
 
   / 1099 Independent Contractor
  • Thread Starter
#7  
Roy - K-1 is a form that you file if you are taking profit as a dividend from your Sub S corporation...so as an independent contractor you would be like a sole proprietorship...you would file a Schedule C and list all your work related expenses and you would pay both sides of Social Security as I remember but again, I am not an accountant but I have been through this for my own account. Sub S Corp . is the way to go if you can get them to agree...otherwise just list out " all " of your expenses on the schedule C...

Since this position will require travel (mostly within PA), can a personal vehicle be depreciated?
I'm aware I'll need to talk to an accountant. I just want other folks' experience to determine if this is a viable opportunity (meaning I can make money at it).
I cannot name the company or it's client...but I have had contact with other (of the company's) independent contractors. Seems like many were retired folks supplementing their retirement.
What I'm looking at would be more then 30 hours (and likely more then 40 hours) per week.
 
   / 1099 Independent Contractor #8  
Since this position will require travel (mostly within PA), can a personal vehicle be depreciated?
I'm aware I'll need to talk to an accountant. I just want other folks' experience to determine if this is a viable opportunity (meaning I can make money at it).
I cannot name the company or it's client...but I have had contact with other (of the company's) independent contractors. Seems like many were retired folks supplementing their retirement.
What I'm looking at would be more then 30 hours (and likely more then 40 hours) per week.

Roy you can take mileage and it is pretty generous now I think...check it out and remember you can deduct " all " of your expenses on that schedule C...just keep track of all of your receipts...you would be surprised how many things are a business expense.
 
   / 1099 Independent Contractor #9  
I work as a "1099 contractor" and practice law and have done so for years. It is more expensive tax-wise for sure. I feel that as a contractor you should be paid at least twice your comparable hourly rate as an employee. Being a contractor has substantial risks and costs and you should be paid for them. Also the fact that someone else will set your schedule is questionable. There are legal tests for contractor vs. employee and this is a consideration. Many companies abuse the distinction to their advantage. I strongly recommend that if you want to proceed you set up an LLC for yourself. I set up PA LLCs for people--cost usually around $500 including state fees. You can do it yourself with some research for less but you take more risk.
 
   / 1099 Independent Contractor #10  
Roy
I agree with Brandt on the LLC and compensation. As a registered advisor I must prequalify I am not giving legal or tax advise. I suggest finding a tax person to consult with. I look for one that will defend you in an audit rather than keep you out of one. The latter may be to conservative. Pick up quick books to log expenses and income and a copy of Tax Savvy for Small Business (originally from NOLO press). This does a great job to provide a good overview of the business types. There are book keepers that can set up quick books for your business in a couple hours. But, since you own a tractor you may want to figure that out on your own (lol).

One final note look into the auto expensing carefully once you start one way you can't change on that vehicle. Also, there are some tax traps when you buy/sell or put an exiting vehicle into service.
Ron JD670
Chartered Financial Consultant. ChFC
 
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