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alnilam posted:So how significant is the underpayment penalty? You might want to do some reading up on all this at irs.gov, dude. IC is a totally different beast than being an employee.
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Oct 20, 2015 02:54
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Yeah i was hoping there was a simple answer but it looks like there's not, thanks for giving me some idea of the right direction for what to read about. I'll do some reading and maybe come back here with some questions later. God damnit national labs, why you gotta be so complicated
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Oct 20, 2015 02:57
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uberwekkness posted:While I was digging last night, I heard that I can do this as a sole proprietor, get their info with a W-9, and cut them a 1099 at the end of the year. Would that work too? Simplicity would be great, but obviously I don't want to do the wrong thing here, and have it come back and bite me in the rear end. I see this wasn't answered. There are some legal and IP ownership issues implied with what you propose here (In that as the sole proprietor, you would basically own the IP unless another agreement was reached between the company and your partner.) Also the 1099 route your partner will need to pay a bunch of taxes etc.
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Oct 20, 2015 15:26
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Okay, I got a little more info digging around on what the IRS says about contractors. I'm doing better but I'm still a little confused about something. The IRS defines indenepdent contractors here and it doesn't seem to fit my situation. They even specifically say IRS posted:If an employer-employee relationship exists (regardless of what the relationship is called), you are not an independent contractor and your earnings are generally not subject to Self-Employment Tax. I'm paid by a sort of umbrella organization for post-docs, and even some PhD students, who work in a certain chain of government labs. We post-docs are paid through this organization so that we don't have to be federal employees, but I hardly ever interact with that organization and my bosses are federal employees here at the lab. My position is technically called an "educational opportunity" and my salary is technically a "stipend," according to the organization that pays me. My terms of appointment letter for this post-doc says this (organization name redacted just in case): Org that pays me posted:All stipend payments and housing allowances paid by (XYZ) directly to the participant or on her/his behalf are considered taxable by the U.S. Federal government and should be reported annually. Stipend payments are not considered wages and should not be reported as such. Participants will have no tax withheld by (XYZ) from their payments and should consider filing Form 1040-ES on a quarterly basis and pay estimated Federal income taxes to avoid being out of compliance with Federal regulations about the timeliness of tax payments. So XYZ is adamant that I am most definitely NOT their employee. But the IRS seems to suggest that I am an employee, even if not in name - at least insofar as I'm not a self-employed independent contractor. So which am I? And what do I report my "stipend" as? XYZ tells me they are definitely not wages, but the IRS seems to suggest that they're not self-employment income either (and not subject to self-employment tax). I need to figure out this detail before I can figure out the rest of what I have to do here.
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Oct 20, 2015 21:19
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alnilam posted:Okay, I got a little more info digging around on what the IRS says about contractors. I'm doing better but I'm still a little confused about something. Hmmm yes the contract says "this person is definitely not an employee!" therefore it must be so. That, or the "organization" you're working for realizes that this relationship between them and their "contractors" is really an employer/employee relationship and is (pointlessly) throwing language into the contract to make people like you believe that this is a legitimate arrangement (it's not). Nobody, especially the IRS, gives a poo poo about what that contract says. Based on what you're describing, however, this is definitely self employment income. Is this "organization" somehow affiliated with your school? Are you going to be issued a 1099?
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Oct 20, 2015 22:48
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alnilam posted:Okay, I got a little more info digging around on what the IRS says about contractors. I'm doing better but I'm still a little confused about something. Common test questions for determining 1099 status are like: Who determines your hours? Who determines where the work is to be performed? Are you able to negotiate your pay? Do you have a contract for X (hours / deliverable) for Y pay? Does your engagement have specific start and stop dates, or a deadline? Are you allotted specific periods of time off, are you required to inform about these in advance? Note that this company wants to classify you as a 1099 employee so that you need to pay your own taxes and they don't need to pay your payroll taxes for you. They may be doing so illegally. Trying to fight with them about it may not go well for you, though.
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Oct 20, 2015 22:52
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But if you think that you are actually an employee and not an independent contractor, you can file an SS-8 form to request a determination by the IRS. If they agree, they will try and collect the payroll taxes from your employer.
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Oct 21, 2015 03:32
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alnilam posted:Here's a question that's perhaps so basic, I'm having trouble finding a basic enough answer. 1.) You are exempt from the penalty if you withheld or made estimated tax payments greater than what you paid in taxes last year. This means that if you suddenly make a lot more money this year (eg a job that triples your income), the amount you need to withhold to avoid the penalty is rather low. 2.) If you do owe an underpayment penalty, there is a difference between paying your taxes on tax day and paying them on January 1st (or earlier). Don't procrastinate, figure it out now!
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Oct 21, 2015 04:29
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SoftNum posted:Common test questions for determining 1099 status are like: quote:Who determines where the work is to be performed? quote:Are you able to negotiate your pay? quote:Do you have a contract for X (hours / deliverable) for Y pay? quote:Does your engagement have specific start and stop dates, or a deadline? quote:Are you allotted specific periods of time off, are you required to inform about these in advance? I just wrote the HR sort of people at XYZ asking specifically if they consider me an IC and if I will receive a 1099. I'm guessing from what y'all have told me that the answer will probably be yes. This is pretty annoying considering I work in a federal lab on a government project, and the nonprofit XYZ exists solely to facilitate researchers working at various government labs. But I'm realizing it's probably not unusual for the government to contract work out in this way. Also, I'm realizing that 2015 is going to be weird because I got W2 income until August, and then this weird non-W2 income starting in late September. So tell me if this sounds right: I use 1040-ES to estimate how much I would owe total for this year, subtract off what was withheld on my W2 from my old job (which I have to estimate based on 2014 because I didn't get pay stubs), and the remainder is what I ought to remit in January? Regarding the poster above me, and I read about this in the 1040-ES too, am I correct here: I am allowed to use my 2014 taxes to estimate what my 2015 taxes will be, subtract what has been withheld at my old job, and remit the remainder in January? Like, I can just look at my old 2014 return, look at my total taxes paid, and copy that exact number to the 1040-ES as my estimated annual payment for 2015? Then I subtract off what has been withheld so far, and remit the remainder in January. Cause this sounds like the slightly lazier, easier option for me to do now (or at least, in January). I'm aware it means I'll end up owing money in April but as long as there's no penalty that's okay.
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Oct 21, 2015 15:14
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My Dad died ten years ago. My estranged stepmom just contacted me for the first time since he died saying she'd been holding onto a Roth IRA where I'm the beneficiary. She wanted to surprise us on his 60th birthday. It's a lovely thought and I'm quite touched. Unfortunately, my read of the tax code says by not taking RMDs it will be subject to a 50% penalty. Any advice for me? I think I need to fill out form 5329 ASAP and plead ignorance, but I don't know what the chances are the IRS will be forgiving.
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Oct 22, 2015 05:25
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Okay so the HR-type people at the non-profit that pays my stipend got back to me, when I asked if I was an independent contractor, and if I would get a 1099. XYZ posted:Because participants are not employees, the payments you receive (stipend + insurance) are not considered wages and should not be reported as such. Stipend payments are payments made to you in order to help defray living expenses while you are engaged in your research participation program. So uhhh... I guess I don't need to bother with fica/self-employment tax, so do I report my stipend (plus health insurance payments they make on my behalf) as.... misc income? All I'm being told is "do NOT report it as wages or salary" but nobody's telling me what I do report it as. Also, should I worry that I'm going a significant portion of my life (I'm 28) without paying FICA tax at this point? Is my social security benefit going to be poo poo?
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Oct 22, 2015 16:45
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KS posted:My Dad died ten years ago. My estranged stepmom just contacted me for the first time since he died saying she'd been holding onto a Roth IRA where I'm the beneficiary. She wanted to surprise us on his 60th birthday. It's a lovely thought and I'm quite touched. The IRS has been extremely forgiving on the 5329 penalty if you attach a statement as to why you didn't get the RMD. What you do is calculate your taxes in 2015 as if whatever taxable impact your would have had in the prior ten years was taxable in 2015, pay said tax in the current year in full, and ask for forgiveness ("rectify the situation"). Simply state you were unaware of the Roth IRA and you had a family member responsible for the estate who neglected to inform you of the account and RMD requirements since his date of death. Since it's a Roth, the tax hit probably won't be too bad, if any.
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Oct 22, 2015 17:03
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alnilam posted:Okay so the HR-type people at the non-profit that pays my stipend got back to me, when I asked if I was an independent contractor, and if I would get a 1099. That's an unusual setup; my best guess would agree with you and report it on line 21 (write "stipend [dollar amount]" on the blank line next to the line to specify what it is) of the 1040. Can't find anything else to specify differently anyway. As for FICA, the rule is you have to earn 40 "quarters" of SS taxed income of at least ~$1200 to qualify for the retirement benefits. So basically working 10 years at a standard job or paying SE tax as a contractor/business owner will do it. The actual amount you get is a different thing, related to average income you made. So don't panic, I imagine working at least 10 years before age 65 is something you can manage  .
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Oct 23, 2015 14:38
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MadDogMike posted:That's an unusual setup; my best guess would agree with you and report it on line 21 (write "stipend [dollar amount]" on the blank line next to the line to specify what it is) of the 1040. Can't find anything else to specify differently anyway. Thanks! So it sounds like in January, i should pay what i expect my total tax to be this year, minus what was withheld at my old job, to avoid an underpayment penalty.
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Oct 23, 2015 16:16
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I might be wrong but I am pretty sure you need to pay your expected tax in December for this year. If you pay in January isn't it the wrong year?
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Oct 23, 2015 17:28
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spwrozek posted:I might be wrong but I am pretty sure you need to pay your expected tax in December for this year. If you pay in January isn't it the wrong year? https://www.irs.gov/publications/p505/ch02.html#d0e6371
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Oct 23, 2015 17:55
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Good to know. I have just adjusted my withholding from my real job to account for my rental income but I fully expect the government to be stupid about anything so thought I would ask.
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Oct 23, 2015 18:00
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spwrozek posted:Good to know. I have just adjusted my withholding from my real job to account for my rental income but I fully expect the government to be stupid about anything so thought I would ask.
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Oct 23, 2015 20:06
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This isn't crucial information to have, but how would I go about getting a ballpark figure of how my student loan interest effects my tax return? I've tried to look it up on google to avoid asking, but most of the articles are useless. I'm trying to decide my next move after aggressively paying my car off. I could either pay off my student loans as quick as possible and be debt free, or max my HSA, IRA (roth) and 401k (also roth) and pay the minimum on loans with about 2/3rds going to interest right now. But back to the tax part. Is it impossible to know without all the wage figures and adjustments, or is there a set amount you can actually deduct? I know you can claim up to $2,500, and I believe I may have seen something saying you can only take 25% for a max of $625. Is that right? With that in mind, I would just figure 25% of whatever I paid?
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Oct 24, 2015 12:03
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Moneyball posted:This isn't crucial information to have, but how would I go about getting a ballpark figure of how my student loan interest effects my tax return? I've tried to look it up on google to avoid asking, but most of the articles are useless. I'm trying to decide my next move after aggressively paying my car off. I could either pay off my student loans as quick as possible and be debt free, or max my HSA, IRA (roth) and 401k (also roth) and pay the minimum on loans with about 2/3rds going to interest right now. You can deduct up to $2,500 if your income, MAGI, is under $65k and the deduction is phased out up to $80k. Deductions lower your taxable income and since the tax rate for the $36,901 to $89,350 tax bracket is %25, the deduction saves someone in that tax bracket up to $625. You can find more information under the IRS Publication.
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Oct 24, 2015 14:06
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I received a gift of stock today from a relative. Everything I'm reading is indicating that I don't have to worry about paying taxes on this until I sell the stock and a gain is realized. So is it true I can basically let it sit in my brokerage account and not have to declare it as income or anything when I file taxes next year? Is that also applicable for state (Massachusetts in my case) taxes as well?
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Oct 28, 2015 00:26
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CapMoron posted:I received a gift of stock today from a relative. Everything I'm reading is indicating that I don't have to worry about paying taxes on this until I sell the stock and a gain is realized. So is it true I can basically let it sit in my brokerage account and not have to declare it as income or anything when I file taxes next year? Is that also applicable for state (Massachusetts in my case) taxes as well? Correct.
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Oct 28, 2015 01:37
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Both my wife and I will be working for a foreign company in the Gulf (where there is no personal income tax, but I am aware of the requirement to file in the United States). Until 12/31 of this year, I'm employed by a US company living abroad. 1/1 I'll change over and she'll start. I'll be a salaried regular employee of a foreign company and she'll be a contractor, possibly for only a 6-month project. Is there any benefit to either myself or her establishing an LLC or Sole Proprietorship or other legal entity to receive/report this income? I'm thinking primarily in terms of either a) deferring some of the collection of income for me (which will exceed the foreign income exclusion) b) allowing me to create a Solo 401k to increase our ability to contribute to retirement accounts. It may be the case that there's no benefit - her income will be under the exclusion, so entirely tax free. Mine will be significantly over (yay absurdly expensive housing) but I'll be an employee so I may not be able to tell them "write the checks out to Kaishek Consulting please".
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Oct 29, 2015 09:47
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kaishek posted:Both my wife and I will be working for a foreign company in the Gulf (where there is no personal income tax, but I am aware of the requirement to file in the United States). Until 12/31 of this year, I'm employed by a US company living abroad. 1/1 I'll change over and she'll start. I'll be a salaried regular employee of a foreign company and she'll be a contractor, possibly for only a 6-month project. You're an employee. So no.
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Oct 29, 2015 12:26
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Admiral101 posted:You're an employee. So no. Gotcha. I wasn't sure if it being for a foreign company made any difference. My wife, however would be a contractor. Does the fact that her income would all fall under the foreign exclusion mean that we'd derive no benefit from giving her a Solo 401k/anything else?
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Oct 29, 2015 12:30
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kaishek posted:Gotcha. I wasn't sure if it being for a foreign company made any difference. My wife, however would be a contractor. Does the fact that her income would all fall under the foreign exclusion mean that we'd derive no benefit from giving her a Solo 401k/anything else? How long have you and your wife been living in this foreign country? When do you anticipate returning to the US? edit: and I reread your original post - I read it at first as a US company paying you while you work abroad for the next year. You should be able to do some retirement contribution deferral - at least an IRA. I'll take a look at it. Admiral101 fucked around with this message at 13:10 on Oct 29, 2015 |
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Oct 29, 2015 13:04
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CapMoron posted:I received a gift of stock today from a relative. Everything I'm reading is indicating that I don't have to worry about paying taxes on this until I sell the stock and a gain is realized. So is it true I can basically let it sit in my brokerage account and not have to declare it as income or anything when I file taxes next year? Is that also applicable for state (Massachusetts in my case) taxes as well? As a practical matter, the relative's cost basis becomes your cost basis for a gift, so make sure you get PROOF somehow of what their cost basis is in the investment.
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Oct 29, 2015 18:14
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Admiral101 posted:How long have you and your wife been living in this foreign country? When do you anticipate returning to the US? Thanks - I know this veers into "pay someone" territory. We've been here since May, and are planning on staying indefinitely. I'll meet the requirements for the foreign income exclusion by spending the required number of days in the year period out of the country. For the upcoming year, beginning on January 1, both of us will be working for a foreign company. That's where I wasn't sure if being an "employee" of a foreign company really matters for how I recognize that income in the United States (to a sole proprietorship, for example). It would be useful to be able to open up a Solo 401k both to transfer previously deductible IRAs into and to have a 401k, which I'll lose when I switch from a US company to a foreign one. Expat thread: everything is harder.
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Nov 3, 2015 09:35
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As a software contractor, if my boss and I mutually agree to lower my rate from X -> X-25% for a specific section of work(after it's done), can I deduct that 25% as a loss on my taxes?
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Nov 3, 2015 16:14
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lord1234 posted:As a software contractor, if my boss and I mutually agree to lower my rate from X -> X-25% for a specific section of work(after it's done), can I deduct that 25% as a loss on my taxes? Like your work was so bad they are making you pay back 25% of what you were already paid? Or they haven't paid you yet? Was this a condition of you moving into the different job at the same company or something? It sounds really weird.
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Nov 3, 2015 20:19
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Droo posted:Like your work was so bad they are making you pay back 25% of what you were already paid? Or they haven't paid you yet? Yeah, what the hell? They did work and then got negotiated into believing the work was poo poo and they should take a 25% haircut or what? I don't see this as a deductible loss, trying would probably constitute fraud. Think about if this were a legitimate deduction, every business everywhere would be quoting on the basis that their actual rate would be less later on so they get tax-free money.
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Nov 3, 2015 20:39
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baquerd posted:I don't see this as a deductible loss, trying would probably constitute fraud. Think about if this were a legitimate deduction, every business everywhere would be quoting on the basis that their actual rate would be less later on so they get tax-free money. I don't see the issue? If the employer originally was going to pay $100 to lord1234, then there were issues with the product and lord1234 agreed to credit (assuming lord1234 is accrual basis) or return $25 (for either cash or accrual basis) in lieu of a less than great product, there is no problem here for lord1234 so long as the $75 is properly claimed as income on the appropriate return (if the employer took the full $100 deduction on their return instead of $75, that's technically their problem/fault). Horseshoe theory fucked around with this message at 00:59 on Nov 4, 2015 |
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Nov 4, 2015 00:49
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Droo posted:Like your work was so bad they are making you pay back 25% of what you were already paid? Or they haven't paid you yet? What job at the same company? This is a hypothetical. I am not an hourly employee so this isn't about me... baquerd posted:Yeah, what the hell? They did work and then got negotiated into believing the work was poo poo and they should take a 25% haircut or what? The scenario is this. Employee A has an hourly rate of X an hour. Bills for 80 hours. The contractor says, we feel like you overcharged us, either a) we'll pay you for the 80 hours, but there will be bad blood, leading to ending of the role or b) accept a 25% cut on the X rate (IE we'll pay you for 60 hours instead of 80) and we'll keep working together. It's a weird situation for sure, but it's definitely a loss somewhere right, since 20 extra hours were worked but not paid for?
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Nov 4, 2015 04:16
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I'm really confused. You're throwing around contractor and employee like they're interchangeable, but they're two distinct classes of employment with different laws regarding the retroactive changing of their rate of pay. What is the situation?
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Nov 4, 2015 04:21
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NancyPants posted:I'm really confused. You're throwing around contractor and employee like they're interchangeable, but they're two distinct classes of employment with different laws regarding the retroactive changing of their rate of pay. What is the situation? contractor. Definitely an independent contractor.
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Nov 4, 2015 04:29
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lord1234 posted:The scenario is this. Employee A has an hourly rate of X an hour. Bills for 80 hours. The contractor says, we feel like you overcharged us, either a) we'll pay you for the 80 hours, but there will be bad blood, leading to ending of the role or b) accept a 25% cut on the X rate (IE we'll pay you for 60 hours instead of 80) and we'll keep working together. It's a weird situation for sure, but it's definitely a loss somewhere right, since 20 extra hours were worked but not paid for? Was the 80 hours declared as income on the return?
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Nov 4, 2015 04:50
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Return hasn't been filed yet... But why would the contractor declare hours as opposed to a dollar figure? The contractor received a lower dollar figure...
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Nov 4, 2015 14:34
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lord1234 posted:Return hasn't been filed yet... But why would the contractor declare hours as opposed to a dollar figure? The contractor received a lower dollar figure... When you start playing tax games, it's just a headache. We just can these kind of clients, frankly. Tax preparer winds up getting dragged into their mess.
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Nov 4, 2015 18:46
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lord1234 posted:Return hasn't been filed yet... But why would the contractor declare hours as opposed to a dollar figure? The contractor received a lower dollar figure... This. An "hourly" wage for a contractor isn't really a thing usually, it's just how to determine what the job should cost. Which begs the question of how much longer you intend to keep contracting for a dirtbag who wants to lowball you after the fact (barring some, like, material defect in the work). That's a load of poo poo.
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Nov 4, 2015 19:21
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You declare how much money you made period would be my interpretation of what you're describing; the IRS doesn't care about "promised this much but got $X", they just want the $X income. If they actually paid you the money then wanted a refund, there is a refunds/returns line on the Schedule C where you would deduct that out (put the original full amount down as part of gross receipts in that case). Just double check any 1099-MISC they give you against how much you were actually paid to make sure; if they pay you less but put the full amount down on the 1099-MISC they may be trying to scam the IRS themselves so be sure you're accurate on your end (make sure you have very clear records of what they actually paid available - OK, "make sure you have clear detailed records" is pretty much rule one of any sort of tax stuff really, but this kind of story twigs my paranoia enough to emphasize that here). Anyway, my off-the-cuff assessment, and I'm just into my second year of doing taxes professionally so value it accordingly, this is the kind of thing I'd be walking over to the 10+ year veterans they usually team me with to double check .
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Nov 4, 2015 22:51
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