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how does a person become an independent contractor? - Wondering

Posted: Aug 12, 2010

I was just wondering how does a person become an independent contractor? I see a lot of job openings for them but not really sure what is involved. Could someone explain how to go about getting into being and independent contractor? Thank you so much!

IC - jeannieb

[ In Reply To ..]
An Independent Contractor is someone who does work for a company, but is not an employee. At the end of the year, the company will send a 1099 tax form instead of a W-2. You will be required to pay social security at a different (higher) rate than an employee. No taxes are withheld from your check by the company. If you earn enough, you will have to file a quarterly (every three months) form to pay your taxes.

tell me more please - Wondering

[ In Reply To ..]
So Jeannieb, do I have to get a license to do this? How do I know if I need to pay taxes quarterly and how do I go about doing that. I feel really stupid. I suppose I can get a hold of H&R Block and they can help me with the tax information that I need? Thank you so much for the information. More and more companies I am seeing are hiring the IC. I have a feeling my company is on its way out the door and I need to find a new company.

Clarity on paying SS - SM

[ In Reply To ..]
You only pay higher SS because you are paying employee and employer part of SS. Employee part would come from your wages whether IC or employee, The employer part you pay you get to claim as a write off. As IC you get LOTS of write offs.

How much taxes??? - sm

[ In Reply To ..]
Get a tax guy, his fee is write off. He can tell you based on past earning or what you expect to make, how much to pay quarterly. If I see my earning are up or down, I call him and we readjust how much I will send. At end of year, if you didnt pay enough, you will pay the deficit then or if you paid in too much, you get a refund (which I then apply to the next year's first quarterly payment.

mind boggling - Wondering

[ In Reply To ..]
wow this is all so mind boggling! ok so say I get hired as an IC. I then get me a tax person, tell him what I made over the last couple of years, he figures what I need to pay the next quarter, then when it comes close to time to pay the taxes call him and let him know what I have made so far and he can tell me to put in more or not. Will he also be able to tell me what my write offs are? I feel there are a ton of things I need to know but not really sure on what they are or what questions to ask. Sorry guys. You would think after doing this job for 20 years I would know but this part is totally new to me.

Easy way to figure quarterly - SM

[ In Reply To ..]
To make it easier, take what you made last year and divide by 12. Then tell tax guy what you made a month last year. He will tell you what quarterly should be and then you just need to know if you are on target to make less, same or more. If you are going to make less or the same, just send in what you discussed. If you see you are going to make more, call him to find out if need to send more.

Write off - SM

[ In Reply To ..]
Google IC write offs. My tax guy knew alot of what I could write off but I had to remind him I could pay my children to work for me and their pay was also write off. I figure I would be giving them money anyway, might as well use it as write off and get my office dusted in the bargain.

IC TAXES - MT

[ In Reply To ..]
I had never had to file quarterly tax payments as an IC before and was scared due to fear of the unknown.

I decided to purchase a computer software for the taxes that I filed this past April. It had the "HR Block" name on the cover and was specifically for "small businesses." After going through the program and figuring out my taxes due at that time, it also had a program in there for figuring out what I would need to send quarterly for the remainder of the year 2010, based on my earnings for 2009, plus provided vouchers to print to send with the quarterly payments.

In addition to paying taxes due on earnings from 2009, I also had to send a quarterly payment in April for taxes on earnings for 2010. In addition to that, quarterly payments are due June 15, September 15, and next January 15. If you file your yearly taxes by January 15, 2011 for 2010 earnings, you do not have to send a quarterly payment.

It also indicated that, if your income goes up, you can copy one of the vouchers and send an extra payment, do this as many times as you want.

Then, by April 15, 2011, you file the final tax return for 2010 earnings, claiming the payments that you already made just like as if you had been an employee and had had taxes deducted.

With this software, it includes inputting of all income, including employee and IC income to combine in one tax return.

Anyway, my point was that the purchased software seemed to work out great. The software cost me about $89. As far as I could tell, it was only good for one year, but I feel it was well worth the $89, plus I will deduct the cost of the software from next year's taxes.

HTH

Tax guy advantage over software. - SM

[ In Reply To ..]
THe good thing about a tax guy is if there is any interaction with the IRS, you just refer them to tax guy, you dont have to deal with them.

Tax guy vs software - MT

[ In Reply To ..]
I disagree. Plus, the price of the software included a live consultation.

So if IRS comes knocking at your door - SM

[ In Reply To ..]
you would rather talk to them than have the tax guy talk to them? Not me. I am no expert in taxes and certainly no expert when it comes to talking to IRS. I will let tax man do it.

Just A live consult? I can call tax man as often - as I need to.

[ In Reply To ..]
Just "A" live consultation? I can call my tax man as often as I need to.

Yeah, I guess you could throw the software box at the - IRS agent at your door. NM

[ In Reply To ..]
s

Not always true. - Some tax services charge extra for this.

[ In Reply To ..]
So if you didn't pay extra for the representation, they will not deal with the IRS for you. They may advise you on what will happen and what you need in hand, but you will still be responsible for meeting with the IRS agent.

You just hafta look around. Mine doesnt charge - for this service. NM

[ In Reply To ..]
q

Are you then paying your kids as contractors - mtic

[ In Reply To ..]
or employees?

Paying kids - SM

[ In Reply To ..]
In my state, kid can earn up to 2000 a year and not pay taxes. So I "paid" each kid 1800 (didnt want to seem greedy and attract IRS attention). Tax guy said didnt have to have a schedule to show, just that they did work, dusting office, vacuuming office, shredding, anything to help me do my work. THis was a business write off too. You can pay every month but I waited til end of year and wrote one big check. This actually went as spending money for them but some went for groceries, utilities etc.

write-off for paying kids - cp

[ In Reply To ..]
Do your kids have to be a certain age before you can "pay" them to help with cleaning office area? I had no idea about that. Where do you find out about what your states requirements are about how much they can earn.

Paying kids - SM

[ In Reply To ..]
Ok, lets be serious here. I would cut a check for each kid at end of year. We would go to bank, cash check and the kid could carry money to the car. Then I got the money and usually used it to pay on credit card, most of which charges were for the kids. I think my youngest was like 9 when I started this. I think the kid just has to be old enough to dust, vacuum, etc. Tax man told me how much child could earn with no taxes, but hey, as MT GOOGLE IT!! lol

Paying quarterly - AML

[ In Reply To ..]
Since my income year to year fluctuates greatly based on work available (sometimes less, sometimes a lot more), instead of using the predetermined amount based on last year's pay, I take 25% of what I made that quarter and send 75% of that amount to federal and 25% to state. This way I don't have to worry at the end of the year with underpayment. I have never owed more at the end of the year and have always gotten a refund. By the way, I am married and in the 25% tax bracket. If you are single and in a lower bracket then use that percentage.

The first year I was an IC I had no idea I was supposed to pay quarterlies. When tax time came and I owed last year's taxes and my first quarter. Wish I had known because I had to get a small loan to pay for it!

It is not that difficult to do yourself -sm - ECMT

[ In Reply To ..]
Regarding quarterly taxes, I do not do them, never have, we have owed the last 2 years but not enough for the little flag to pop up saying I had to do quarterly taxes (this did happen on my state though so doing quarterly there now). I will be doing that EFTPS system though, which is basically prepaying your taxes, I just need to set it up, have my account and ID, but you need to go in there an manually set up each payment every time. I need to set it up for about $50 a week. I generally owe about 10% of my gross income in SE tax, not the 25-33% everyone tells you to take out. If you have enough write-offs you can get it down as I have. You have to do a Sch. C and SE on the regular 1040 form. Obviously write off everything you can think of, paying the kids mentioed above, that is one I did now know about....might have to start doing that...gonna get killed this year so hence I plan to make a few large prepayments using EFTPS before the end of the year, shooting for at least $1K....I have a very PT side job that I have an extra $100 month taken out wehn I make enough to do that, so I end up getting an extra $700-$800 paid into my Federal taxes that way each year. Write off everything you can think of, part of your electric bill, heat-propane/oil, supplies (ink, paper), any computer programs, computer, phone bill, internet connection, etc. I get pretty creative but it is all legit.

Wow - Wondering

[ In Reply To ..]
wow, thanks for all of this information! I would have never even thought about all of that stuff. Well I will seriously think about working as an IC. This year so far sucks big time, hardly any work on my accounts and now they reduced our pay so not looking good. Do the companies you work for have a set amount that they pay you like if you were an employee or do you get to set your own price?

OH, sweet innocent, naive you. - SM

[ In Reply To ..]
You will get paid cents per line. WOrk little, get paid little. Tweak how you work, be serious about it and work hard and get paid more.

LOL - Wondering

[ In Reply To ..]
Figured it would be by line but wasn't sure if the hospital sets the amount or if you can say I need 8 cents instead of 6 cents. I guess if you want more they won't hire you. Told you, I am new to all of this stuff! lol A lot of companies going to IC and I don't want to be stuck working at Wal-Mart! (No offense to those of you who work there also).

ANother thing about paying kids - SM

[ In Reply To ..]
Another reason to talk to tax guy about paying kids. Initially I sent form to IRS about paying kids but not enough for them to pay taxes. After several years, taxman said probably dont need to do that anymore. Last year was 1st year didnt pay kids cause they had real jobs and were going to have to pay taxes. It was a chunk of money I really missed. Almost made me want to have more children. ALMOST....

paying kids - cp

[ In Reply To ..]
my kids are younger but old enough to do chores. I need all the help I can get when it comes to deductions/write-offs for taxes. I will talk to tax person about that. Thanks for the info. It really helps.

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