Independent Contractor and Taxes

[Tyme2fish]

My son was just hired as an "independent contractor" in a sales field.<br />As such, where can we look or what advice can you give as to keeping records of expenses and what is deductible as to job expenses.<br />I am completely ignorant on this subject as I've always been a W-2 employee with no job expenses.<br />Any web sites or books that would help us is greatly appreciated.<br />Thanks in advance.

 

[Ron G]

Re: Independent Contractor and Taxes

??????i have know idea,he will be 1099 and probably needs to pay quartly taxes.hope someone can help.

 

[Link]

Re: Independent Contractor and Taxes

I've done that before. <br />Why learn to be an accountant? Hire one.<br />Here is what ours had me do in the same type of job.<br /><br />At the end of each day (not just after work)<br />Put all receipts for money spent in an envelope with the date on it.<br />Gas, oil, food, clothing, car payment/lease etc.<br />Put it in a shoe box.<br />You are done! <br /><br />Repeat every day.<br /><br />At the end of the quarter drop shoe box off with accountant.<br />After a couple follow up phone calls from them, they will tell him what <br />to write the check for. Or not! <br /><br />We found our gal by word of mouth which is the only way to hire one. <br />She works out of her home for low overhead. <br /><br />But to answer your question this may help<br /><br /> http://www.bankrate.com/brm/news/biz/adviser/20020314a.asp

 

[KRS]

Re: Independent Contractor and Taxes

go and buy a $15 tax preparation program (taxcut/turbotax/etc) and go through it with hypothetical numbers, and answer all questions to determine all possible deductions.

 

[TilliamWe]

Re: Independent Contractor and Taxes

KRS said what I was going to say. Except, that you would need to use Turbo Tax Premiere, and it's about $60. It's worth it though. Cause the IRS wants "expenses" grouped together in some less than logical ways. So if you do it your way, you'll have a heck of a time converting it to their way after a year.<br />Filing quartly will be a reality, but you can get away with not doing it for the first year. <br />If your son is going to be a n independent contractor the rest of his life, it wouldn't hurt to find a real accountant, and pay him to set him up. I was too cheap to do that this year, but I may in the future.

 

[Tyme2fish]

Re: Independent Contractor and Taxes

Thanks for the advice. I did a google search and was overwhelmed. <br />His "boss" is supposed to help on this stuff, but I just wanted to have a heads up as what to expect.<br />The boy (man) is all excited in that he thinks he'll make about $1,000 or $2,000 a week. I burst his bubble when I told him that about 50% would go to taxes.

 

[Boomyal]

Re: Independent Contractor and Taxes

Tyme2fish, you should help him un-burst his bubble. He will not pay too much more in taxes, as an 'independant' contractor than he would if he was an 'employee' and he will have a lot more 'flexility'.<br /><br />There are two areas where it costs more. Whereas an employer can deduct 100% of medical insurance premiums, payed on behalf of an employee, a 'contractor' can only deduct a certain percentage of them. I believe that percentage is increasing every year until it reaches 100%.<br /><br />You talk about paying our legislators too much money to come up with goofy laws! <br /><br />The biggie, that can sneak up on you, if you are not disciplined, is 'self employment' tax.(social security and medicare which is 15.4% of the gross) <br /><br />Whereas an 'employee' has half of the 15.4% deducted from his pay check and the employer pays the other half, the 'contractor has to pay the whole nine yards. If you wait (1st year only) until the end of the year to pay it...go figure. 15.4% of 50K- ouch!!!<br /><br />Then of course there is both state and federal income tax. People get lazy because they are used to having it withheld. At the end of the year, you could really get slammed.<br /><br />Do as was suggested above. speak to an accountant or use a tax program and make quarterly tax payment after he has set aside his monthly estimated obligations. After year one, the IRS will make him do that anyway.

 

[ndemge]

Re: Independent Contractor and Taxes

We used turbotax premier this year, It did the Schedule C for us, asked for all the deductions.<br /><br />One thing is Milage, for my wife's daycare stuff, I hadn't kept accurate log for milage, so I didn't claim it this year. <br /><br />After all the deductions, the income was pretty nill.

 

[Tyme2fish]

Re: Independent Contractor and Taxes

Good answers iboaters. Thanks for the replies.