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Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 1644
Experience:  Certified Public Accountant
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My wife may start working for a PR firm as an independent

Customer Question

My wife may start working for a PR firm as an independent contractor. What additional tax liability do I have and is there a benefit to forming a business entity for her. I work as a salaried employee and also have some 1099 income
JA: The Accountant will know how to help. Is there anything else the Accountant should be aware of?
Customer: Thats the cliff notes
Submitted: 3 months ago.
Category: Finance
Expert:  Mark Taylor replied 3 months ago.

Hi, my name is Mark. I will be happy to help you with your questions. As an independent contractor you would be able to deduct any ordinary and necessary expenses that you incurred as a result of this income. The net income would be subject to both self employment and income taxes. Self employment taxes are 15.3% of the first $127,200 of earned income. You would paid income tax in addition to this amount. So if you were in the 25% tax bracket the net income would be taxed at roughly 40% at the federal level.

Customer: replied 3 months ago.
Is there any benefits to forming an single member LLC or S-corp for the 1099 income?
Expert:  Mark Taylor replied 3 months ago.

If you formed a single member LLC it could be treated as a partnership or as a Corporation. If it is treated as a partnership it would be considered a disregarded entity. The income and expense would be reported on schedule C or your individual tax return. The net income would be subject to both self-employment taxes and income taxes. So there would be not difference other than liability protection. If you treated the LLC as a corporation you would have the option of making a S-Election An S-election would allow the income of the S-Corporation to flow to you personally. The S-Corporation would not pay any taxes. The income that passes through would not be subject to Self employment taxes. However, with a S-Corporation you are required to pay officer's a reasonable salary. The S-Corporation would save a little bit on the self employment taxes. However, with an S-Corporation there are additional administrative costs. These costs include the requirement to file a separate tax return and that you must pay wages, file payroll reports (941, 940, w-2's and state reports).