Question for those that do/have done freelance or independent contract work

[waiyahna]

A friend of mine owns a business where she would like some administrative and light bookkeeping help. She doesn't have any other employees and I don't think I want to do this full time. I would like to approach it as an independent contractor/freelance (if that makes sense).
It is only for around 10-15 hours a week. My question is, as far as tax purposes would the simplest route be a 1099?
I went on the IRS website and my head began to spin. I know some people here are self employed or do freelance work. I am hoping someone can point me in the right direction.

[teresaice]

If you are a contract employee or freelance, yes a 1099 would be the way she needs to report. Before you agree to a rate of pay, you might want to keep in mind that a payroll employee pays 1/2 of their social security and medicare, but as self employeed you will be paying the entire portion. I think it is around 15% now so the extra part would be around 7 1/2%. You will also see it listed as self-employment tax.

[Stef]

Yes, 1099 is the best route, and what Teresa says is true. Also, know for next year that you can generally get a deduction for self-employment tax. I can't remember how much off the top off my head, but when I'm doing a return for someone who has self-employment tax, they always get a deduction for it (I think it's if you make less than a certain amount, but not positive as the software calculates it.)

[Jenng]

Yes, I do independent freelance work as an athletic trainer. Instead of being paid by the university they just paid me as a 1099 employee. After getting ripped for taxes after two years I finally asked them to put me on payroll directly. Now even though i make the same per hour I come out way ahead because of taxes. If you are on 1099, make sure to keep track of any business expenses such as mileage, supplies, professional development and education costs, licensure or certification fees, etc. This will reduct your taxable income. Be sure to check the IRS website for specific deductions as I am not a CPA.

[Stef]

You can go here and look at the specific deductions. Note that mileage is only for business travel and NOT commuting - that's not deductible. Also if you use part of your home for work, like an office and it's a dedicated business space, you can deduct a portion of your mortgage interest, insurance, utilities (phone ONLY if it's a dedicated business line), etc.

[waiyahna]

I thank you all so much for the information. Thanks Stef for the link! I think If I set aside 25% of my weekly pay that should help with paying the taxes. I hope this works out for the both of us, I want to see her business prosper and with the hours I can still be there to pick up/drop off my son and pursue other things.

[LITSA]

waiy......make sure you pay estimated taxes.......or you could get a penalty when you file you return for the next year. There are a lot of other things I could say, but.....


Blessings and Hugs, "Angel"

[Stef]

How to pay quarterly estimated taxes