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Paying taxes as an IC? - Anna

Posted: Feb 24, 2015

I recently started working as an independent contractor for a transcription company and understand that I have to take care of the tax side of it myself. I'm new to this and am not sure what I need to do as far as paying taxes go. Any insight would be greatly appreciated! Thanks!

I'm in the same position - New 1099er

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nm

IC/taxes - taxes

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What you should do is right off the bat, out of every paycheck you get, put aside 15% of that money for the next year to cover taxes (at least). If there are state taxes, Social Security taxes, Medicare taxes, best get some advice from a professional in your state.

First...sm - Anon

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start setting aside 30% of every check. Next, go to the IRS website where you can probably find out all about it. They probably have instructions and maybe even a way to submit you taxes quarterly over the internet or coupons to mail in with your payment. It may be a good idea to have a consultation with a CPA initially who can tell you exactly what expenses you'll be able to deduct when you file your taxes. You'd be surprised how many there are. His fee is also a tax deduction.

Keep those receipts and copies - sm

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I used to deduct heat, electricity, gas, telephone, internet, garbage disposal, office supplies, insurance, mortgage interest, computer expense, etc. on a prorated basis (get a tape measure to measure your office and deduct the expense). Tax preparation and advice will be deductible to. Do not forget a retirement account.

When I was an IC ...sm - Lifer

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I had a second checking account to where I moved the percentage of income/medicare taxes after my pay was deposited in my regular account. I did that as soon as I was paid. Then be sure you pay income taxes quarterly or you will have to pay a late penalty if you do it at the end of the year. I used the coupons IRS provided and made a copy of the coupon with my payment check before mailing them to the IRS. Keep receipts of everything and set aside a folder where you can easily drop them in there. Good luck!

I'm an IC - sm

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Before becoming an IC, I was terrified of the tax situation, all of the "pay quarterly" advice I was getting, etc. Well, I use H&R Block, I don't pay quarterly and I claim EVERYTHING on there, from the square footage of my office to utilities, everything. I also have two kids, so I know that helps, but I got back $7000 this year. It's not as bad as you may think.

I had a CPA do mine when I was IC and she said - I was working for peanuts

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after all that had to come out. You normally get 7.5% taken out for FICA and the employer pays the other half, but as an IC you pay all 15%. That doesn't even begin to cover taxes. I never paid quarterly as the penalty does not amount to very much, but I quit doing IC when she told me my 18/hr was netting me around 11/hr (this was a 2nd job, though).

Did CPA tell you about all the write-offs IC can take? - nm

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c

Write-offs not that good a deal - CaliMT

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Some people seem to think that an IC can write off all of her expenses, which is technically true, but it doesn't mean that you save a dollar of taxes for every dollar you spend. Suppose you spent $100 on office supplies. You don't get a $100 deduction in your taxes -- you only get a deduction of the amount of tax you would have paid on that $100. So if you have a tax bracket of, say, 25%, your taxes would be reduced by $25 for every $100 you spend. If you're not charging significantly more than an employee would receive, you're not making much profit. All of the MT companies I've seen lately tell you what they intend to pay you; they don't let you tell them what you charge. Would your accountant stand for that? Could you go into her office and say that you will only pay her minimum wage when she normally charges much more than that? She would probably tell you that she couldn't do your work for that price and show you the door, but that's not an option with the MTSOs. When they dictate the price, they are really acting like employers and not clients, which is what they should be when they are hiring ICs.

You can write off more than just office supplies. Working at home, you can write off % of electric, - water, trash p/u, cable, phone, SM

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office supplies, computer and other equipment, ie, printer, speakers, keyboards, gas to go p/u supplies. When kids were younger, I was able to write off up to 2K per kid as they "helped" me, dusting, taking out garbage, shredding paper. Even with that, CPA told me I could pay them even if they did very little and he had never heard of anyone getting audited for that. He told me the IRS wants ppl to work, they are not out to push anybody into the unemployment line.

I also had an atty tell me the gvment doesnt want to put anybody in jail. Gvment want ppl to work and pay taxes. And now the IRS has even fewer agents to investigate tax fraud and they are not likely to concentrate on the lttle IC MT and tie up what agents they have that way.

Heck, even the cost of a CPA is a write off. So you CAN save a substantial amount of money with write offs. And in 2014 with Windows no longer supporting XPPro, I will be writing of my new computer and the cost of having Windows 7 Premium put on my old computer. Oh yah, cost of having a computer tweaked by my computer guy, removing viruses, etc, is a write off.

OH yeah, and a portion of mortgage and home insurance. If you are IC and you pay - your own insurance, that is write off. What ever

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size of your office space is, you can take that percentage off as write off. So if office space is 10% of you total home area, you can take 10% off all the items mentioned, except kid payment. Each state determine what kid payment can be taken.

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