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1099 income?

Discussion in 'Asset Protection/Taxes/Legal' started by CarrieW, Feb 28, 2008.

  1. CarrieW
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    CarrieW Gold Contributor Read Millionaire Fastlane Speedway Pass

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    for 1099 income do you have to pay self employment taxes? if so how does this work?

    any links would be greatly appreciated! (I am in georgia if it makes a difference)
     
  2. bflbob
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    bflbob Bronze Contributor Read Millionaire Fastlane Speedway Pass

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    A 1099-Misc usually implies you are an Independent Contractor.
    In effect, you are in business for yourself.

    I believe you file Form-SE (check www.irs.gov for form).
    This attaches to your Form 1040.

    If you have income, you usually have expenses, so take the time to document them.
    You're limited on the expenses, but supplies, mileage, etc all count.
     
  3. CarrieW
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    CarrieW Gold Contributor Read Millionaire Fastlane Speedway Pass

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    what about the state? is the self employment only one tax or is there one for the fed and state?

    this is like one of those stupid word problems in math I used to hate lmao!

    its my dh job. we are trying to figure out what to do. he got another job offer to start at the same pay he is at but supposedly increasing fast after he gets done learning the job anywhere from 1-3 wks his income should double.(so they say)

    right now hes on 1099. the guy he is working for was supposed to start paying him more money like 2 months ago. (it started at 350 a week untill there were over 30labor hrs then it was supposed to switch to labor rate of 17 dollars a hour. lenny never got the bump to labor rate.) so we havent paid any taxes on anything since he started.

    the new job is going to be w2. the new guy wants him to eventually manage a 2nd location and is promising everything under the moon but only wants to start him out at 350 a week. doubling in 1-3 wks. its refurbishing alternators and starters.

    his current boss has offered him 550 a week. he gave us paperwork to have it taxed regularly but we can keep it 1099 if we wanted Im sure.

    also the current job is less then 5 minutes away has the benifit of having the shop and cheap parts to work on our cars and if he doesnt take the other job we can sell the 2nd car thats not on the road.

    the new job is about 35 minutes or so to get there and like 50 to get home. its 40 hrs per week tho and the old one is 60.
    we would have to put the 2nd car on the road(new boss has offered use of the company s10 for a while tho) and spend alot more on gas.

    car ins is about 30 bucks a month. the gas will be anywhere from 120-180 a month.
    cost to fix the car is about 150 to get it back on the road and about 500 to fix completely.(if dh wasnt a mechanic it wouldnt be worth it for how much it would cost lol)

    he has untill tommorow to figure out what to say to who and what to ask for.
     
  4. jimculler
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    jimculler New Contributor

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    THe Self Employment tax is 15.3%. It covers Medicare and Social Security.

    If you were W2, your employer would have to pay half (7.65%) and you pay half. Since you are self employed, you pay the whole 15.3%.

    Before you freak out though, go see a CPA and figure out what you can deduct before you get hit with it. Also you may need to make quarterly tax payments to avoid problems at the end of the year.


    Make sure and talk to a tax pro, because I am not one. I have just been getting 10-99's for a long time.
     
  5. CarrieW
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    CarrieW Gold Contributor Read Millionaire Fastlane Speedway Pass

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    well its done now.

    current boss offered dh 650 a week to stay and agreed to fire the other mechanic(isnt very good dh has to fix his mistakes constantly)

    its going to be 650 a week w2. another raise in a few months.

    dh told the other guy he was staying I hope he doesnt offer dh more money too lol.
     
  6. jimculler
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    jimculler New Contributor

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    Why not have them bid as high as they can? He must be pretty darn good at what he does.

    :eusa_clap:
     
  7. CarrieW
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    CarrieW Gold Contributor Read Millionaire Fastlane Speedway Pass

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    the process of doing this is very stressful to Lenny and I lol. I wouldnt be surprised if the other place does offer him more.

    the thing with switching jobs again right now is going a full week without a paycheck which leaves us 2 wks of him getting there (gaswise) with like no money. so they would have to at least match his current bosses offer and not hold a check.

    He is a great mechanic but he has this quality that draws people to him. everyone who ever meets him always says to me he seems like such a nice guy! lol. Im like yeah hes nice I think Ill keep him lol.

    when he worked as a mechanic years ago, all the customers used to drop their cars off to only be worked on by him. when I had wendy I didnt know most of the customers but everyday for like 3 wks after we got home lenny would bring home presents his customers had dropped off for us during the day.

    the alt and starter place said they had 86 applications and did over 25 interviews before Lenny and he was the only one they wanted. I feel bad but money talks right now.
     
  8. Diane Kennedy
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    Diane Kennedy Bronze Contributor

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    Not quite following whether your hubby is getting 1099 income or W2 income now or not, but in answer to the first question.

    Form 1099 income is filed on a Schedule C - Sole Proprietorship. There is an added self-employment tax of 15.3% on the net income from the business. It can be a killer, if people aren't ready for it. Two things: (1) Strongly recommend you form an S Corp or an LLC-S to avoid the self-employment tax (2) Being 1099 versus W-2 is a godsend when it comes to taxes. You can now deduct legitimate business expenses such as: cell phone, computer, ISP, home office, business travel, tools, and the like. They have to be really business expenses, used in the "ordinary" and "necessary" production of income.

    Most people with businesses find that they pay a LOT less in taxes than they would as an employee even with the self-employment tax, because they now get to write so many things off.
     
  9. CarrieW
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    CarrieW Gold Contributor Read Millionaire Fastlane Speedway Pass

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    Thank you so much Diane!

    I just told Lenny what you said and he is going to get the 1099. we will be starting an s crp or the llc-s asap. I have to do a little research to see which one would be better for us.

    If we do set up the corp would we be able to do trading thru the business as well as his 1099 income? or would that need to be seperate?(if we could trade thru it it would likley double the business expenses)
     
  10. Diane Kennedy
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    Diane Kennedy Bronze Contributor

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    That's a good question Carrie.

    If you had made an actual trade, I would say "heck yeah" in a heartbeat. Until then, the argument could be made by the IRS that you aren't really in business yet, you're still researching.

    In general, you can easily combine two different types of business within one business structure. We don't always want to do that because there could be assets put at risk. Just as an example, let's say an OB/GYN (highest incidence of lawsuits in the medical profession) has an LLC-S and starts doing trading and he keeps very high balances in the company account. The OB/GYN piece statistically has a good chance of being sued, and now he's put a lot of cash at risk by operating it all in one.

    I don't see a lot of risk in your husband's business, so it should work out. Just make a trade first so the IRS can't claim it was a hobby.
     
  11. CarrieW
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    CarrieW Gold Contributor Read Millionaire Fastlane Speedway Pass

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    yes I wont be deducting anything untill I start which should be very soon. (when I do I was planning on writing off some of the materials Ive used/purchased. Does it only count if it was spent in the current year or can I go back some?)

    I will be trading way before the end of the year. (hopefully by the latest june) and then I will likely be trading almost everyday the market is open.

    the 1099 just makes it that much worthwhile for us to set up faster. I was always planning on having some type of business for the trading. this 1099 stuff kinda fell in our laps.
     
  12. CarrieW
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    CarrieW Gold Contributor Read Millionaire Fastlane Speedway Pass

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    if we started a c-corp or an s -corp(im leaning more towards a c for various reasons)we wouldnt need a 1099 right? I would just bill him weekly for the work lenny provided and then as the corp pay lenny a set salary or even 1099 him?

    reasons I am leaning towards a c instead of an s(may be incorrect in my thinking so please correct if I am wrong)

    1. most of the income from lenny being a sub contractor will be paid to lenny weekly.
    (expensed out of the business so only leftovers would be profits)
    2. want to provide insurance and various benifits out of the income thats left.(100% paid
    by company and not be considered additional income)
    3. will be keeping profits(leftovers after salaries and fringe benefits) in the structure to
    grow the business/trading account for quite
    some time.(dont want to pay yearly dividend taxes on that while I am reinvesting)

    problems I see

    1. when we finally come to a point of collecting actual dividends the double taxation.

    I am hoping with some strategic planning this can be reduced.


    since lenny and I are married and considered 1 shareholder does that mean that we can only draw one salary with me still participating or would I need to draw an actual salary myself?
     

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