Independent contractors
Question
Independent contractor tax questions?
In August my fiancee and I started working for an employer that pays us with a business account check but doesn't take out any taxes. We know come tax season things are going to get confusing so we're trying to get some things cleared up now. I'm assuming the best way to file would be as an independent contractor since we work from home and because of the way he pays us. My real question is what counts as deductions. We work from home but we both have offices that we could go to if we needed to. I'm at home about 99% of the time working and my fiancee about 80% of the time. Can we count a portion of our home as a deduction? And is this only if you own not if you rent? Also we both use internet 100% of the time we are home on the job. We would have internet even if we weren't working from home and when we're not working we use it for personal use. Could we count a percentage of the internet as a deduction. The same goes with cell phones. We both have PDA's that we use to communicate with our boss and other business associates we must talk with. But we also have them for personal use. Percentage? We also obviously use our own personal computers but they were purchased a few years ago and are used for personal use as well. Could we count a percentage of the depreciated value of them as a deduction. I need to buy a new computer for personal and business use but I haven't yet... Would it count? My fiancee uses our car for business trips and is reimbursed by our employer for gas and mileage. The car is also used for personal use. I know this is a lot of questions but we're both clueless as to what we need to do. We're probably going to pay someone to do our taxes at least this year. I'm quite worried about all this since I've heard that as an independent contractor you must pay back about 15% of your net pay... That's... a lot. Anyway, any help with this would be appreciated. I'm browsing trying to find some information on my own but I'm not really used to how they word things so I end up getting confused and frustrated. Thanks in advance.
4 weeks ago - 1 answers
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You're not an independent contractor because of where you work or how you are paid, but because of who has control over how you work. Far too many people are improperly classified as independent contractor by businesses that are illegally evading their payroll tax obligations. The fact that you work for one firm only would indicate at least peripherally that you really are employees, NOT contractors. Does the business determine how you do the work? Can you farm the work out to a 3rd party? Can you do the work on YOUR schedule, vs when the business wants it done? The answers to these questions are important in making the determination. And the fact the the business provides an office that you could use does indicate that you are an employee and not a contractor. (And providing an office that you could use but choose not to pretty much precludes ANY deductions for a home office.) Your first step is to file a Form SS-8 www ... with the IRS to get a formal ruling on your status. You have enough time to do that and get a ruling by the filing deadline so get on that right away. If you are a contractor, yes you are responsible for paying about 15% in self-employment taxes on your profit. That's on top of the income taxes that you will owe. And if you have not been making estimated payments using Form 1040-ES you will likely be facing penalties for underpayment of estimated taxes. Until you get the IRS ruling on your status it's not feasible to advise you how to proceed at this time. Get that out of the way and repost your question at that time.
4 weeks ago
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