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quote:I did use google and that is what caused the confusion, I was told by the person in accounting to plan on saving one percentage and google was coming up with another that's why I was looking for clarification. I will receive the 1099 tax form. So I will only be paying the self employment tax that is 15.3%, so if I were to save every penny of that percentage I wouldn't have to pay any other taxes to anything payroll related? Let's say you make 50,000 on your 1099. You pay 13.3% on that 50,000. That's only payroll taxes. You also pay income tax on that same 50,000 (though you can deduct a portion of the self employment tax from that 50,000). From the fact you're referring to the person who hired you as your "Boss" and talking to people in "accounting", I'm somehow doubting you're an independent contractor, and are just getting scammed by someone who doesn't want to pay their share of payroll taxes.
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Oct 6, 2011 01:44
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Admiral101 posted:From the fact you're referring to the person who hired you as your "Boss" and talking to people in "accounting", I'm somehow doubting you're an independent contractor, and are just getting scammed by someone who doesn't want to pay their share of payroll taxes. I concur completely. Just curious, have you been writing down all the business expenses you incurred as an independent contractor and saving receipts? The only way that being an independent contractor is potentially advantageous from a tax perspective is if you keep proper track of these. Also, do you and your "client" have a written agreement in place that sets out the nature of your relationship and defines how/why you should be classified as an independent contractor? If it ever comes to the point that the IRS questions your status, that can be a very important piece of evidence either way. Sorry to add one more small piece of poop to the conversation, but have you been making installment payments on your income and self-employment taxes? You mentioned that you were trying to calculate how much money to save for tax payments. You actually should be making estimated payments to the IRS quarterly. If this is your first year as an independent contractor you may be able to avoid having to make estimated payments, but in 2012 you very likely will have to prepay your 2012 taxes in quarterly installments, while also making a large tax payment for 2011, since nothing will ahve been witheld and submitted on your behalf by your employer. Oliax fucked around with this message at 06:26 on Oct 6, 2011 |
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Oct 6, 2011 06:22
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Admiral101 posted:Let's say you make 50,000 on your 1099. It's more complicated than that and is much more innocent than it sounds but that is besides the point. Oliax posted:I concur completely. The first year I was just waiting until tax time to pay the taxes since there is no penalty. I was told if I took 20% out of each paycheck I would be fine and I just wanted to make sure because like I said before I've seen 13.3%, 15.3%, 20%, and 25% and am just trying to figure out my out the door tax costs but I can't seem to get the same answer twice.
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Oct 6, 2011 14:43
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hello internet posted:It's more complicated than that and is much more innocent than it sounds but that is besides the point. SE tax is based on your net business income (roughly 15% of the $50k in the above example). If you have health insurance (SEHI) you can use that as a 1040 deduction as well as reducing your SE tax. Your federal (assuming no state?) income tax would be based on the $50k, adjusted for any other income/deductions (SEHI), less your standard/itemized deductions, spousal income (if any), child credits, personal exemption, blah blah blah. I tell my clients in income tax-free states to save around 35% for federal taxes - it's a high number, but at least you won't have an unpleasant surprise come 4/15.
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Oct 6, 2011 16:57
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AbbiTheDog posted:SE tax is based on your net business income (roughly 15% of the $50k in the above example). If you have health insurance (SEHI) you can use that as a 1040 deduction as well as reducing your SE tax. I gross $31,850 a year right now at my current pay rate that has been increased twice and live in Ohio. All I am trying to find, which is way harder than I expected it to be, is a percentage that I can count on for ALL of my taxes to be owed from employment.
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Oct 6, 2011 17:14
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The issue is that there are about 100 different things that can influence your tax rate. Are you married? Do you have any dependents? Do you itemize deductions? Do you have other income besides from 1099 work? Are you a student? Are you planning to contribute to a retirement account? Do you pay for your own health insurance while you are consulting? Do you have business expenses to deduct? If yes, how much (always the $64,000 question!)? Does your city charge a local tax rate like most in OH do? How much? These are some of the variables that need to be quantified before you can determine what your taxable income is expected to be. After that it is just a matter of Googling "2011 income tax rates" for IRS and OH. It isn't that no one here wants to help you, it's just a much more complex question than you might think and it is impossible to answer simply.
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Oct 6, 2011 18:02
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I don't if this is the right place for this question but I'll give it a shot. I'm doing independent contract work and have made ~5000, last year I paid about 30% of that in taxes. So this year, I'm opening an IRA acct and putting 5000 in there. And if that independent contract work is the only work reported to the IRS roughly how much in taxes can I expect to pay?
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Oct 7, 2011 09:41
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Respekt posted:I don't if this is the right place for this question but I'll give it a shot. I'm doing independent contract work and have made ~5000, last year I paid about 30% of that in taxes. So this year, I'm opening an IRA acct and putting 5000 in there. And if that independent contract work is the only work reported to the IRS roughly how much in taxes can I expect to pay? IRA contributions reduce taxable income, so if you only have $5,000 of income and contribute $5,000 to an IRA you'll just pay Self-employment tax of 15.3%. Of course, $5,000 is less than the standard deduction so it makes more sense to contribute to a Roth IRA and still not pay any income tax.
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Oct 7, 2011 15:52
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I'm a graduate student at a university in California. I make about $16,000 working as a teaching assistant. My (large) tuition fees are waived because I work for the school; I only have to pay about $600 a year in miscellaneous fees. So I've got this 1098-T which says that my tuition bill is about $10,000, and my scholarships/grants are about $19,000. When I enter all this into TurboTax, my bill goes way up; I think it's assuming I made a total of $25,000 (scholarships minus tuition plus W-2 income). That's bad because it would be a tax on way more money than I actually made. My plan is to go yell at the school finance people until they explain this - any thing else I should do in the meantime? edit: OK, think I answered my own question: TurboTax posted:This is not common. In rare situations you may need to make an adjustment to form 1098-T. If a scholarship is reported as income in box 1 of a W-2 and the same amount is also reported in box 5 of Form 1098-T, then you will need to remove the amount from box 5 of Form 1098-T. Vivian Darkbloom fucked around with this message at 19:39 on Oct 8, 2011 |
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Oct 8, 2011 19:32
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Vivian Darkbloom posted:I'm a graduate student at a university in California. I make about $16,000 working as a teaching assistant. My (large) tuition fees are waived because I work for the school; I only have to pay about $600 a year in miscellaneous fees. You made $35k last year so I'm not seeing ho you are paying tax on more than you earned E: on second thought you really only earned your salary plus waived tuition, not sure where the other $9k came from but you should ask about it. furushotakeru fucked around with this message at 23:20 on Oct 8, 2011 |
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Oct 8, 2011 23:09
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furushotakeru posted:The issue is that there are about 100 different things that can influence your tax rate. Are you married? Do you have any dependents? Do you itemize deductions? Do you have other income besides from 1099 work? Are you a student? Are you planning to contribute to a retirement account? Do you pay for your own health insurance while you are consulting? Do you have business expenses to deduct? If yes, how much (always the $64,000 question!)? Does your city charge a local tax rate like most in OH do? How much? GIVE ME AN EXACT NUMBER NOW.
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Oct 10, 2011 22:56
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AbbiTheDog posted:GIVE ME AN EXACT NUMBER NOW. 42
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Oct 10, 2011 23:22
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furushotakeru posted:42 That's it?
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Oct 11, 2011 20:30
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AbbiTheDog posted:That's it? That's the answer. It's up to you to determine the correct question to ask.
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Oct 11, 2011 20:36
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This question came up in a conversation today, and I'm sure you gurus would know the answer. If you pay for a product or service, and the person you paid goes bankrupt before delivery of said product or service (and therefore you do not receive it), does this render you any taxable benefit/deduction?
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Oct 12, 2011 04:58
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I don't know the answer, but in your situation are you: getting a refund, waiting on bankruptcy proceedings, or giving up the money as a loss?
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Oct 12, 2011 14:39
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Small White Dragon posted:This question came up in a conversation today, and I'm sure you gurus would know the answer. This would be a theft loss, which is treated the same as a casualty loss. Reduce the loss by $100 and then 10% of your adjusted gross income for the year, and if there is anything left over it goes on schedule A.
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Oct 12, 2011 15:28
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furushotakeru posted:This would be a theft loss, which is treated the same as a casualty loss. Reduce the loss by $100 and then 10% of your adjusted gross income for the year, and if there is anything left over it goes on schedule A. If this is for a business (you pay for inventory and your supplier goes broke) I'd just write it off in full.
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Oct 12, 2011 16:36
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Is this too complicated for Turbo Tax? Me: one job all year, 401k contributions Wife: 2 jobs + unemployment + Student Loan payments + 401k contributions AND we got married this year (October) It seems pretty straightforward if I write it out like that.... We rent our house so we don't have a mortgage and I don't have student loans.
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Oct 13, 2011 17:48
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zantar posted:Is this too complicated for Turbo Tax? No, TT should do fine. You'll file as married filing joint (probably) all year. The 401(k) is done through your W-2 input screen, and the unemployment shows up on a form as well. Your wife will get a 1098 for the student loan interest, and that's about it.
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Oct 13, 2011 18:32
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I have been doing freelance consulting for a couple of years on the side, never making enough to declare it as anything other than "other income". I am operating without a business structure or tax id. However, this year I will probably make about $15,000 net. I am looking for tax opportunities to reduce my payroll tax (which I have never paid) and additional income tax. I have an un-rented studio in rental triplex I own that I would not mind using as an office. It is near enough to my house that this would be okay. Can I rent this from myself ($385 a month in rent, + 1/3 of utilities, etc), or would the likelihood of getting audited outweigh the benefits? I am vaguely familiar with Keogh retirement plans, would that be a good solution in addition to my Roth? My fixed costs will be about $10,000 (advertising) and some negligible amount of meals. Are there any other obvious things I should be doing?
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Oct 19, 2011 20:32
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Tai-Pan posted:I have been doing freelance consulting for a couple of years on the side, never making enough to declare it as anything other than "other income". I am operating without a business structure or tax id.
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Oct 20, 2011 03:07
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quote:I have been doing freelance consulting for a couple of years on the side, never making enough to declare it as anything other than "other income". I am operating without a business structure or tax id. In terms of "obvious" stuff: 1. You didn't mention mileage. I'd assume that for consulting work, you'd have a degree of traveling. 2. Where does your health insurance come from? 3. You would want to run your business in a separate entity if you want to charge yourself rent. You could feasibly depreciate the studio in your schedule C if it's used for business full time. You will want to talk with an accountant before doing this.
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Oct 20, 2011 03:33
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Admiral101 posted:In terms of "obvious" stuff: 1) No mileage, aside from like 15 miles going to lunches. I work over email/phone 2) I have a full time job 3) Is there any reason to consider anything other than an LLC? Admiral101 posted:You will want to talk with an accountant before doing this. Mattism posted:Contact a CPA. Got it. How do I find a good one? I don't really know anyone else that is as low-end as me.
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Oct 20, 2011 03:54
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Tai-Pan posted:Got it. How do I find a good one? I don't really know anyone else that is as low-end as me. This is me blowing you the worlds biggest raspberry
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Oct 20, 2011 05:42
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I read the OP and I saw the part where you said that MFS is almost never advantageous, but I think it might possibly be this situation, but I may be overlooking something. Spouse 1: Earnings 130k. Spouse 2: Earning 50k. Has significant student loans and is in the IBR program. The loans will never be paid in full and this person will eventually have the remaining balance forgiven after 10 years. No dependents. If they file separately the monthly loan payments are around $500, if they file together the loan payments are $1,500. So, $12k a year extra in loans for the first year, and then it would go up as income increases. I understand filing MFS eliminates a lot of possible tax deductions, but don't most of those deductions only benefit married couples that have an AGI below $180k? After 3-4 years of Spouse 2 making mid 50s, income will shoot up to around 150-200k, but Spouse 2 will still be in IBR. So, if not before, wouldn't MFS be beneficial at this point because the couple with an AGI around 400k wouldn't qualify for any deductions anyway?
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Oct 20, 2011 19:04
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quote:3) Is there any reason to consider anything other than an LLC? A single member LLC would just be reporting the income/expenses on your Schedule C. Single member LLC's are not recognized at the federal level. If you actually wanted to rent to yourself, you would need to form a C-Corp or LLC and file for an S-election. You would not be paying any SE tax, but you would have to pay yourself a "reasonable" wage. Note that all this would require keeping actual financial records, and likely hiring an accountant every year. While I don't know your bracket, I really doubt the tax savings on this would be worth the accounting fees/aggravation. If you expect the consulting business to grow, it's worth going for, but otherwise just make your studio an office. quote:Got it. How do I find a good one? I don't really know anyone else that is as low-end as me. Most of our client base comes from word of mouth. I recommend asking friends. quote:I read the OP and I saw the part where you said that MFS is almost never advantageous, but I think it might possibly be this situation, but I may be overlooking something. The OP is discussing the viability of MFS strictly from a tax perspective. While both of you would lose the student interest deduction, that wouldn't make up 10k a year. You didn't mention whether you itemized or not, but both of you would have to itemize, or both would have to take a (50%) standard deduction. Admiral101 fucked around with this message at 19:58 on Oct 20, 2011 |
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Oct 20, 2011 19:51
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furushotakeru posted:This is me blowing you the worlds biggest raspberry I don't know about you, but when I hear new clients in particular refer to themselves as "low-end" I tend to back away slowly.
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Oct 20, 2011 20:38
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AbbiTheDog posted:I don't know about you, but when I hear new clients in particular refer to themselves as "low-end" I tend to back away slowly. This a thousand times. Every client is cost-sensitive, but any client who leads with that is going to be trouble. (Unless it's a really simple issue that you can resolve easily.)
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Oct 20, 2011 21:12
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entris posted:This a thousand times. Every client is cost-sensitive, but any client who leads with that is going to be trouble. (Unless it's a really simple issue that you can resolve easily.) I said that in the sense that I don't know anyone that has a business accountant that does not have them as a full time employee.
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Oct 20, 2011 22:51
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Tai-Pan posted:I said that in the sense that I don't know anyone that has a business accountant that does not have them as a full time employee. Most of my small business clients do not have a full-time accountant (owner/spouse does the accounting). That makes no difference to me in terms of approaching the client, except I can't criticize the bookkeeper then. The tone I got was in reference to paying for the work, which you can tell sent a few shivers down our spines.... 
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Oct 20, 2011 23:39
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Are there any tax forms needed to declare a private person to person loan?
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Oct 21, 2011 16:34
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No, but you are required to report the interest on the loan as income and pay tax on it.
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Oct 21, 2011 19:57
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And the interest on the loan needs to be at the 7520 rate or higher, or you've got a part-loan/part-gift problem. (Which isn't really a problem for most taxpayers since the gift tax isn't really an issue for most people.)
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Oct 21, 2011 20:25
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AbbiTheDog posted:That makes no difference to me in terms of approaching the client, except I can't criticize the bookkeeper then. Right, but I don't really know anyone that uses an outside accountant. So I cannot really ask around. Also, is there a hybrid person/agency that might be able to do this stuff? Obviously, how this all is treated ties pretty closely into my personal finance. A hybrid accountant and financial planner would be ideal. For instance, I am having a hard time determining if it would make more sense to hire my wife and reduce the gross profit or if the payroll tax+incorporation costs would wipe out the benefit given the low level of income I am producing. Gah, so complicated.
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Oct 22, 2011 00:12
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HiddenReplaced posted:I read the OP and I saw the part where you said that MFS is almost never advantageous, but I think it might possibly be this situation, but I may be overlooking something. Anyone have an answer?
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Oct 22, 2011 15:46
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HiddenReplaced posted:Anyone have an answer? In what state do you live? Also, Admiral101 mentioned that it is more complex than this, just with the specific deductions you both claim. Missing Donut fucked around with this message at 13:39 on Oct 23, 2011 |
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Oct 23, 2011 13:35
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Missing Donut posted:In what state do you live? Georgia. Not married at this point, and one of us is still in school for another year. I'm just trying to plan ahead. I graduated in May, and I'm the one that makes 130. I've never had to itemize before, but I think I will need to start so I can subtract my state income tax(?). No home, so nothing to deduct for that at this point. Because of my AGI, after this year, I don't think I will be able to deduct for investments. I should probably meet with an accountant... 
HiddenReplaced fucked around with this message at 17:11 on Oct 24, 2011 |
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Oct 24, 2011 14:19
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Tai-Pan posted:Right, but I don't really know anyone that uses an outside accountant. So I cannot really ask around. Someone that's a credentialed tax preparer (LTC, CPA) and financial planner is going to run you $$$$. Get a part-time bookkeeper in there to shore up your accounting and meet with a financial planner once a year or so. There are some that do "flat fee" financial planning for retirement.
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Oct 24, 2011 17:13
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HiddenReplaced posted:Georgia. Based on this you won't lose 10k by filing separately. I'm quite surprised that your wife's student loan will actually allow this, though. Double check that.
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Oct 24, 2011 23:48
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