1099 Independent Contractor

[Tomtint]

I have been a S Corp for 25 years. I have always paid my own Health Ins, Workers Comp, Liability Insurance, and 10,000 other things. As a sole proprieter, almost everything can be considered a expense. There are pros and cons to it but I think it is the best fit for me.

 

[RoyJackson]

Be really careful with the "contractor" status. IIRC the IRS has a checklist to use to determine if you are really a contractor and not an employee. From what I have read, most "contractors" are really employees and get burned by the IRS. From what this non-lawyer and non-cpa person reads, it looks like the OP would be working for the company that is contracting with the employer. One of the big checklist items is who controls your time. Can you go home when you want? Who's tools, etc., do you use? Who has final say on the finished product? Do you bill for each job separately? It can be a real mess. Hire a tax professional to get the correct answer.

Yeah, I've already read about the "confusion" between being a W-2 employee and a 1099 Independent Contractor. Doesn't make me an expert, but I figured some TBN members would know about some of the advantages and pitfalls.
The company I'd be working through has a number of 1099 employees and they've been around for quite a while, so I guess they know most of the IRS issues.
I will be talking to an accountant (as I'd posted previously).

 

[Soundguy]

The CPA costs are deductable too, correct?

yep.. under professional services or expenses related to the business.

My wife still runs as an IND contractor for a couple jobs in addition to her teaching position.

over the past 15 ys, we each have turned in a w2 and a few 1099's.. with me turning in 2 1099's for the bulk of that time, just now switched to me turning in 2 w2's as of last year.. her still turning in a w2 and 1099.

the total cpa cost for the year is about equal to 1 weeks paycheck from 1 job.

soundguy

 

[Western]

i did it for the past 12ys and just finally got hired on as an employee.

I got a 1099 at the end of the year instead of a w2... I paid quarterly taxes.... I already filed 1040a long form anyway... I just gave all the stuff to the cpa. bill was about the same when I was an employee as a sub...

money is money...

soundguy

Pretty much the same for me ,"self employed contractor." I am S Corp'd and also receive a 1099 from my major business partner. The S Corp cost me about $400 and gives me a little protection. I find the usual required insurance for job site work, is a bigger PITA than my taxes (cost wise) . I would have to look, but i should know:ashamed: but I am almost sure my CPA/Accountant files me as a S Corp/Sole proprietor. I do benefit from expense related write offs and as mentioned, I had to pick vehicle price or mileage/maintenance as a write off

 

[Soundguy]

yep.. we do the same for the vehicle write off. one reason we keep 3 vehicles. as if you have a non business vehicle available for use, you get to write off the expenses for the business use vehicle..

 

[RoyJackson]

yep.. we do the same for the vehicle write off. one reason we keep 3 vehicles. as if you have a non business vehicle available for use, you get to write off the expenses for the business use vehicle..

We have two vehicles....can you estimate the pecentage of business use (if not 100% business) for one of them?

 

[WM75Guy]

My 2 cents when I worked as an independent contractor. I enjoyed it and made good money. I did the job on my schedule. If they tell you what hours to work, you are not an IC.

Income tax on earnings is the same, there is not separate tax schedules. You can deduct business expenses to reduce tax liability. If you question whether it is a legitimate work expense, it probably is not worth the risk to take it.

You have to pay self employment tax which is the employee and employer share of Social Security and Medicare, for 2011 it is 13.3%. If the 2% SS tax break is not renewed that will go to 15.3%. You would pay half as an employee, so as an IC you would be paying the other half. If you make 7% more as an IC, that's a wash.

Liability insurance is much more than paying out if you get sued and lose. The insurance carrier will pay for attorney fees to defend you win or lose. At the time there was not much to get if I lost a case but attorney fees will mount up quickly at $300 an hour just to respond back to the court if you get served. At $800 an hour for in court time, expenses, etc, you get the picture.

Keep excellent records and receipts. Make copies of receipts as they now fade rather quickly. Staple the original to the copy. Get one credit card and use it only for business purchases. If possible have one vehicle just for business use. If you have an IRS audit just show them what is requested at their office, not at your house. Being organized and detailed is much better. Don't show up with a shoebox full of receipts and have to dig for the one requested.

 

[Western]

We have two vehicles....can you estimate the pecentage of business use (if not 100% business) for one of them?

Roy, the way my CPA does it for me, I write off one truck , the truck I use to go to jobs haul equipment exc tra. When I use the other car/truck like to get small parts or bid jobs, I then write off the fuel. About equivalent to renting a car if you have to fly somewhere for a job so to speak.

 

[Tractor Seabee]

We have two vehicles....can you estimate the pecentage of business use (if not 100% business) for one of them?

Roy, I have a consultant business S corp. If you do not use a vehichle exclusive for business and it is in your name, charge your company on the GSA IRS approved milage rate, believe it is $.56/mile (my accountant figures it). You will come out way ahead personally and it is a corp expense. You need to go to the US Dept of Labor web site and search for the contractor/wage worker definitions. A lot of companys cheat on this a bunch as it saves them all the payroll cost. The Fair Labor Standards Act which DOL enforces also play into this especially who is entitled to overtime rates by law. In general DOL enforcement is driven by complaints from fellow workers who think you are getting a better deal than them. That is why companys get away with it for a long time. If you have only one or two 1099s covering a lot of money and no other earned income that could trigger an IRS audit. IRS and DOL computers are linked. With the S corp I run a payroll for my wages and the my company issues a W2. Keeps it all clean with no red flags. Just make sure your payroll shows you as an exempt employee, as that way you do not have to pay yourself overtime for more than 40 hrs/week unless you have an agreement for overtime. I assign work order numbers to each task I do based on a consulting contract agreement we both sign. I do a master agreement ands then write Task Orders for each new tasking. Creates a good audit trail. Once you get the framework set up it takes very little time.

Ron

 

[Soundguy]

ditto on the milage isse for reimbursement / tax write off.. etc.

same as I've seen / heard.

soundguy