1099 independent contractors tax strategies
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1099 Independent ContractorsTax Strategies#sharedeconomytaxes
Derek Davis, CPA
Shared Economy CPA
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.
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Shared Economy CPA
What is a 1099 Independent Contractor?
• Overview: Cannot direct right or control – simply result
• File Form SS-8, Determination of Worker Status
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.
Common Law Rules (IRS)
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.
Behavioral - Right to control what the worker does and how they complete the job
Financial - Business aspects of the worker’s job
Type of Relationship - Employee benefits available
Employee vs Independent Contractor
• Company benefits of Independent Contractor
• Working arrangements• Paperwork• Benefits• Taxes • Companies maximizing on
this
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.
Independent Contractor Test
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.
Compliance and Instructing Training Required Integration of services into business operations Services rendered personally Hiring, supervising and paying assistants Continuing relationship Set hours of work Performing work on the employer’s premise Services performed in order or sequence set Oral or written reports Payment or written reports
Independent Contractor Test (cont’d)
Payment of business and/or travel expenses Furnishing of tools and materials Significant investment Realization of profit or loss Working for more than one firm at a time Making services available to general public Right to discharge Right to terminate relationship without incurring liability
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.
Risks of incorrect classification
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.
• Employees Classified as Independent Contractors
• Independent Contractors Classified as Employees
• Correcting Misclassification of Employment
Reducing Employment Law Risks for Early-Stage Companieshttps://www.youtube.com/watch?v=QiJK_i8YtDY
Founder as Independent Contractor?
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.
• Fiduciary duty
• Financial interest
Helping Independent Contractors Reap Tax Benefits
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.
• Why this makes good business sense• Hiring and retention strategy• How to help…
Calculating What Contractor Owes
• Hypothetical Example: $35,000 in 1099 Taxable Income and Single• Self-Employment Tax is:
• $35,000 X 92.35% X 15.3% = $4,945
• Personal Income Tax is:• $26,427 x Tax Bracket = $3,518
• Total Taxes Due: $8,463• Total amount of earnings going to taxes 24%
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.
KEEP TRACK OF YOUR BUSINESS EXPENSES!
Scenario 2
Income $35,000Business Expenses $25,000Taxable Income $10,000
Self-Employment Tax $1,413Personal Income Tax $ 318
Taxes You Owe $1,731
Scenario 1
Income $35,000Business Expenses $ 0Taxable Income $35,000
Self-Employment Tax $4,945Personal Income Tax $3,518
Taxes You Owe $8,463
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.
What Are Business Expenses• Business Expenses “are expenses that are the cost of carrying on a trade or business,
they is usually deductible if the business is operated to make a profit”
• What Can I Deduct? • To be deductible, a business expense must be both ordinary and necessary.
• Ordinary expense is one that is common and accepted in your industry. • A necessary expense is one that is helpful and appropriate for your trade or
business
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.
Examples of Business Expenses
• Clothing necessary to perform your job duties
• Food and Beverages when you’re on business meetings
• Supplies: Laptops, Cell Phone Usage etc.
• Car: Gas, Oil, Maintenance• Health Insurance• Home (if you work from home): Rent,
Electric, Utilities, etc. • Other costs directly related to your
business
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.
App of Choice: Tabby
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.
• Free and easy to use sign-up• Download App
• Link up your credit cards
• Record your Business Expenses
• Categorizes accounts based on Tax Form Schedule C
• NO MORE RECEIPTS
• NO MANUAL ENTRY
• www.trytabby.com
Thank you!
[email protected]@hderekdavis
www.earlygrowthfinancialservices.com
415-234-3437
@EarlyGrowthFS
The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.