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PDtax
PDtax, CPA, MBA
Category: Finance
Satisfied Customers: 4410
Experience:  Tax professional and business consultant for 35 years.
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I had a partner for 20 years. We have children and

Customer Question

I had a partner for 20 years. We have children and grandchildren. We did not marry. He owned property, I performed services on those 2 properties only. We are dissolving our partnership. He is paying me now for the services I rendered; a one-time payment. I am "freelance" and "unincorporated". I am prepared to pay incomes taxes on the payment if I am required to do so. Did I have to have a work permit? Can he pay me by check for these wages for services performed without being a business or having paid workmen's compensation?
Submitted: 7 months ago.
Category: Finance
Expert:  PDtax replied 7 months ago.

Hi from just answer. I'mCustomer I'll assist.

You can be paid a fee that is tax deductible by him and taxable to you. Or, his payment could be nontaxable to you and non deductible by him. You have that choice.

If you choose that your payment is taxable, you could have to pay 15.3% self employment tax, and income tax. If this is your sole income, you might have tax credits. Let's assume you don't.

He gets a tax deduction, and you have taxes to pay. Doing it this way likely costs the two of you some tax cost (he gets a tax benefit, but you have a high tax to pay). The exact tax rates would be needed to figure it out. It's likely there is a meet tax to pay.

It would be better if he gave you a gift. No tax deduction, but no tax to you either. Let's say he wanted to pay you $20,000. He gets say $6,000 in tax deductions. You pay $7,000 in total taxes. If he gives you $14,000, you get an extra $1,000 net.

You do not need to be a business, and you do not need workers compensation coverage.

Thanks for asking at just answer. Positive feedback is appreciated. I'mCustomer