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Old 07-16-2013, 08:09 PM   #1
Fire14
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Subcontractor and Taxes

OK I just need some general help in getting low down on this.

I'm looking at possibly becoming an agent for a Healthcare Co. preforming clinics, giving flu shots etc.
The basic email I got said I would be a subcontractor of this co and receive a 1099 form. So I need to know what this means when it comes to paying my income taxes for fed and State. My google search didn't really help me much, I can't afford a lawyer and my current "real" job is about as useless in this area as a piece of paper.
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Old 07-16-2013, 08:12 PM   #2
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Originally Posted by Fire14 View Post
OK I just need some general help in getting low down on this.

I'm looking at possibly becoming an agent for a Healthcare Co. preforming clinics, giving flu shots etc.
The basic email I got said I would be a subcontractor of this co and receive a 1099 form. So I need to know what this means when it comes to paying my income taxes for fed and State. My google search didn't really help me much, I can't afford a lawyer and my current "real" job is about as useless in this area as a piece of paper.
You would pay your taxes at the end of the year. You'll want to save a portion of each check. There may be a way to pay quarterly, but I just do it all at once. You may also get a self employment tax. Everyone is so different you'd probably want to talk to a tax guru, but you don't need a lawyer.
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Old 07-16-2013, 08:13 PM   #3
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Quote:
Originally Posted by Fire14 View Post
OK I just need some general help in getting low down on this.

I'm looking at possibly becoming an agent for a Healthcare Co. preforming clinics, giving flu shots etc.
The basic email I got said I would be a subcontractor of this co and receive a 1099 form. So I need to know what this means when it comes to paying my income taxes for fed and State. My google search didn't really help me much, I can't afford a lawyer and my current "real" job is about as useless in this area as a piece of paper.
I do freelance work at get 1099s. When I do my taxes there is a section to put that information in. And yes, you still need to pay the taxes even if they're not taken out of your check.

If you're self employed (which you will be since you're getting 1099s), you are supposed to pay taxes quarterly. I don't do that, but only because I pay taxes through my full time job (and I still get money back in April).
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Old 07-16-2013, 08:18 PM   #4
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Quote:
Originally Posted by Fire14 View Post
OK I just need some general help in getting low down on this.

I'm looking at possibly becoming an agent for a Healthcare Co. preforming clinics, giving flu shots etc.
The basic email I got said I would be a subcontractor of this co and receive a 1099 form. So I need to know what this means when it comes to paying my income taxes for fed and State. My google search didn't really help me much, I can't afford a lawyer and my current "real" job is about as useless in this area as a piece of paper.
If you're going to be getting a significant amount of income from the 1099's, you may want to make quarterly estimates. Otherwise you run the risk of being underpaid on estimates and could be subject to penalties or interest. If you have a large refund each year with your personal return, then it shouldn't be an issue.
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Old 07-16-2013, 08:24 PM   #5
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We pay our taxes every 3 months. Our tax person lets us know what to pay each year. I dread it.
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Old 07-16-2013, 08:35 PM   #6
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I have been a contractor (1099) for the last 18 months. I pay my taxes quarterly. It's my understanding that if you get to the end of the year and haven't paid in enough (within a certain range), you could get hit with a penalty. If the withholding from your regular job is sufficient, it might not be an issue. But if your 1099 work will be a substantial part of your income, you'll want to estimate. Last year, I did the calculations myself (there is a work sheet on the IRS website). I still ended up having to pay more at the end of the year, but I wasn't in the penalty zone. Our tax guy went ahead and calculated the estimated payments for me for 2013, so I just have to write the checks and mail them.

ETA: This is the estimated tax work sheet: http://www.irs.gov/pub/irs-pdf/f1040es.pdf
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Old 07-16-2013, 08:51 PM   #7
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Do you also have to pay social security? Is it double because you have to pay your portion plus employers?

Found this - http://www.ssa.gov/pressoffice/facts...afacts2013.htm

15.3% is a big hit
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Old 07-16-2013, 08:58 PM   #8
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A self employees person must also pay both sides, worker's and employer's portion of Social Security . . . a total of 12.4% . . . over and above income tax. You are also liable for any state and local income based taxes.
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Old 07-16-2013, 09:01 PM   #9
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Thanks for the help everyone. I could do quarterly payments just to cover my butt. My current job would probably be 1/2-3/4 of my income but they seem to not withhold as much as they should either at times, I have always gotten decent refunds back 2000-4500 filing jointly but since I've had some stuff going on this year I'm not sure where I stand and would prefer to "miss" 200.00 now vs having to come up with 6000.00 later.
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Old 07-16-2013, 09:10 PM   #10
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It's not just SS - it's Medicare as well, an extra 2.9%. SS withholding would stop at a certain point; if you have enough compensation where your net C plus W2 box 1 is over $113,700, then anything over that only gets hit with the 2.9%.

My wife has been a freelancer for years. My advice to you - deduct, deduct, deduct. Any business gifts? Deduct. Business lunches? Deduct. Talk to your accountant, obviously, but we take a significant portion of my wife's income off because of the deductions.
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Old 07-16-2013, 09:32 PM   #11
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Quote:
Originally Posted by design_mom View Post
I have been a contractor (1099) for the last 18 months. I pay my taxes quarterly. It's my understanding that if you get to the end of the year and haven't paid in enough (within a certain range), you could get hit with a penalty. If the withholding from your regular job is sufficient, it might not be an issue. But if your 1099 work will be a substantial part of your income, you'll want to estimate. Last year, I did the calculations myself (there is a work sheet on the IRS website). I still ended up having to pay more at the end of the year, but I wasn't in the penalty zone. Our tax guy went ahead and calculated the estimated payments for me for 2013, so I just have to write the checks and mail them.

ETA: This is the estimated tax work sheet: http://www.irs.gov/pub/irs-pdf/f1040es.pdf
We don't get anything back, but it does work better. I don't like doing my own taxes.
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Old 07-16-2013, 09:48 PM   #12
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Originally Posted by Pills View Post
It's not just SS - it's Medicare as well, an extra 2.9%. SS withholding would stop at a certain point; if you have enough compensation where your net C plus W2 box 1 is over $113,700, then anything over that only gets hit with the 2.9%.

My wife has been a freelancer for years. My advice to you - deduct, deduct, deduct. Any business gifts? Deduct. Business lunches? Deduct. Talk to your accountant, obviously, but we take a significant portion of my wife's income off because of the deductions.
If OP decides to aggressively deduct - document, document, document.

FYI . . . Quoted poster is correct, the Self Employment tax rate is 15.3%
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Old 07-17-2013, 05:00 PM   #13
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Basically you would be self-employed and running your own business, under certain rules and restrictions set forth by the healthcare company.

When they poay you, there will be no deductions from you pay for any taxes.

I would also suggest going to www.irs.gov and order the following publications which will probably help a lot.

334 - Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ)
463 - Travel, Entertainment, Gift, and Car Expenses
535 - Business Expenses
551 - Basis of Assets
552 - Recordkeeping for Individuals
560 - Retirement Plans for Small Business (SEP, SIMPLE and Qualified Plans)
583 - Starting a Business and Keeping Records
587 - Business Use of Your Home
946 - How to Depreciate Property

And also, if the time can be spared and at and minimal cost take a first semester Principles of Accounting course at a local Community College. Not necessarily to keep the books, but to get an understanding of what the business is doing.

Note that most small business fail within the first few years not because the owner did not know his subject but because they did not understand the accounting.

Mike (CPA Retired)
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Old 07-17-2013, 05:32 PM   #14
Fire14
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Thanks for tips. I understood them not withholding taxes. I took biz math in HS so I have basic Idea and I wouldn't be using my home for work related stuff anymore than I do now.

Quote:
Originally Posted by Cheshire Figment View Post
Basically you would be self-employed and running your own business, under certain rules and restrictions set forth by the healthcare company.

When they poay you, there will be no deductions from you pay for any taxes.

I would also suggest going to www.irs.gov and order the following publications which will probably help a lot.

334 - Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ)
463 - Travel, Entertainment, Gift, and Car Expenses
535 - Business Expenses
551 - Basis of Assets
552 - Recordkeeping for Individuals
560 - Retirement Plans for Small Business (SEP, SIMPLE and Qualified Plans)
583 - Starting a Business and Keeping Records
587 - Business Use of Your Home
946 - How to Depreciate Property

And also, if the time can be spared and at and minimal cost take a first semester Principles of Accounting course at a local Community College. Not necessarily to keep the books, but to get an understanding of what the business is doing.

Note that most small business fail within the first few years not because the owner did not know his subject but because they did not understand the accounting.

Mike (CPA Retired)
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Old 07-17-2013, 06:20 PM   #15
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My mother is a 1099 employee. As others have said, you must pay the full SS/Medicare (employee/employer portion) and all taxes. I believe that the SS taxes must be paid quarterly; however, the federal and state can probably wait until the end of the year if you don't make too much money.

You should be able to deduct mileage/parking that revolves around getting to the jobsite.
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