Independent Contractor Taxes

D

DaveD

Active member
I'm a freelance editor (for practical sake, we'll say I'm freelance starting this quarter) and I've made enough to need to file a 1099.

I've read a bunch of stuff on paying estimated taxes if you don't have withholding and paying self employment taxes, but I am still lost. Has anyone done this before? I have a few questions that are of immediate importance.

1) Should I pay estimated taxes (including self employment tax) before the end of the year?

2) Can I just pay these on my income taxes after the 1st without incurring penalties if this is my first year with a 1099?

3) If I do need to pay estimated taxes before 2011, is this something a turbotax type online (cheap) service can walk me through and file for me?


Bleeh. I live in DC, I shouldn't have to pay taxes at all.
 
This isn't about local DC taxes, this is federal, unless DC has an income tax also. If they do, most states (DC not) just follow your federal return with a different rate. A 1099 is what you get from people that are paying you. Think of it like a W-2 for the self-employed. You may get them, sometimes not. Yes you are supposed to pay estimated taxes, and do so before the end of the year. The idea is that you shouldn't owe the fed anything when you file your personal taxes. If you do, you will pay a penalty. If you have other income, say your wife works and you file jointly, she may have overpaid, and that might cover your obligation...or not. You didn't mention your business structure, sole proprietor or corporation, and that will also make a difference. If you keep good and up to date books, this can help you (or your accountant) decide how much to pay. I have played this game with them for a long time, and you need an astrologer or tarot cards to get this perfect, especially if you have equipment investments, depreciation, and don't forget your section 187 expenses. Bottom line, if you are making decent wages, you should probably pay something, but deciding how much is a real challenge.

Grant
 
DaveD said:
I'm a freelance editor (for practical sake, we'll say I'm freelance starting this quarter) and I've made enough to need to file a 1099.

...
Bleeh. I live in DC, I shouldn't have to pay taxes at all.
Click to expand...

Just FYI - you don't file the 1099, your client "employer" does and you receive a copy from them for your own records. The 1099 is a form your client uses to inform the IRS the total amount they have paid to you in the tax year so they can deduct it as a business expenses. A 1099 is used to report the amount paid to an independant contractor while a W2 is used to report amounts paid to an employee.
 
My advice: A CPA will always save you more than they cost. Ask friends and family, find a good, trusted ally and move forward. You will avoid many sleepless nights.
 
And the accountant's fee is tax deductible!

The reason you want someone who know's the DC laws is because:
A) they know the DC tax laws.
B) they will probably know how to help you with work that's done in suburban Maryland and Virginia, and how that will affect your taxes, and whether you will also need to file in those states.
C) they can help you with your FEDERAL taxes as well.

BTW, here in NY state, there's a quarterly estimated tax payment as well. I suspect that many other states have similar provisions.
 
Last edited:
phudsontx said:
My advice: A CPA will always save you more than they cost. Ask friends and family, find a good, trusted ally and move forward. You will avoid many sleepless nights.
Click to expand...

arniepix said:
And the accountant's fee is tax deductible!

The reason you want someone who know's the DC laws is because:
A) they know the DC tax laws.
B) they will probably know how to help you with work that's done in suburban Maryland and Virginia, and how that will affect your taxes, and whether you will also need to file in those states.
C) they can help you with your FEDERAL taxes as well.

BTW, here in NY state, there's a quarterly estimated tax payment as well. I suspect that many other states have similar provisions.
Click to expand...

Very good advice!

...and yes, here in NY, you pay quarterly estimated taxes (they are based on what you paid in tax the previous year)...and if you're late (even one day)...penalty! If you're making more then the previous year, you need to increase your quarterly payments or have a big nut at the end of the year.

Another good thing about using a professional, besides the write-off, is that they sign your return too....and if there's any questions, they go to him/her...and if you get audited, they will be there too.
Lots of advantages.
 
Thanks for the help. This stuff all makes me pretty nauseous. I've actually talked to a CPA, but while his fee for handling stuff in 2011 seems pretty reasonable, his fee for this year seems high. What should I be looking to pay?
 
Here in Washington, the state, I have a CPA that does my S Corp taxes for $500/yr. He takes a few short phone calls from me, and if I really tie him up on a call, he will send me a billing at $100/hr. I have heard that is pretty reasonable. Note that you don't need a CPA for tax advice, there are plenty of good bookkeeper - tax preparers that are very good. In fact, at most CPA firms, your CPA isn't doing your taxes. My guy is a lone wolf that does all his own work, which is pretty unusual.

Grant
 
You must log in or register to reply here.
Back
Top