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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7018
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I live in Georgia. This is the first year Ive ever worked

Resolved Question:

I live in Georgia. This is the first year I've ever worked as an independent contractor and I started doing so in April 2011. I've read online that most ICs pay taxes quarterly. I'd like to do the same but I have no idea where to begin. I don't know if it's more beneficial to me to continue as an IC or open an LLC/S-Corp. Please help, I feel so overwhelmed and lost with this
Submitted: 5 years ago.
Category: Tax
Expert:  Stephen G. replied 5 years ago.

Stephen E. Grizey :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.

Stephen E. Grizey :

Operating as an independent contractor is the most straight-forward & simplest income tax wise.

Stephen E. Grizey :

Your income tax reporting will be preparing a "Schedule C" to be included with your annual Form 1040 filing to report your independent contractor earnings - (self-employment income); you will also need to prepare a Schedule SE to compute your self-employment tax (social security tax).

Stephen E. Grizey :

What type of work are you doing?

Customer:

I am a print and web designer for a fashion brand

Stephen E. Grizey :

Do you use a tax preparer or CPA now?

Customer:

We used a tax preparere for our 2010 taxes, yes

Stephen E. Grizey :

You might seriously consider a CPA to make sure you take advantage of everything you can as a self-employed independent contractor.

Customer:

Thank you, XXXXX XXXXX look into that

Stephen E. Grizey :

There are several ways to meet your estimated payment requirements. The general rule is that you need to estimate your self-employment income & compute your estimated income taxes on a quarterly basis, with estimated payments due on 4/15, 6/15, 9/15 & 1/15 of the following year (which is the 4th estimated payment for the preceding year).

Customer:

Great to know this, so my next filing date would be 9/15

Customer:

I missed the 6/15 one although Ive been ICing since April

Stephen E. Grizey :

Making estimated payments on self-employment income isn't optional; if you don't make them or if you don't qualify for an exemption for a particular quarter; you will pay a penalty (computed like interest) for the amount that you should have made until you actually make the payment either late or with you tax return.

Customer:

ok

Customer:

So I'm probably penalized as of right now being that I've been ICing since April?

Stephen E. Grizey :

Yes it would be 9/15, BUT you may be ok with respect to 6/15.

Stephen E. Grizey :

I would suggest that you see a CPA now so he/she can advise you as to what to do re your estimated payments, get you into his tax preparation system for 2011; give you some guidance as to what expenses you might be able to deduct against your gross self-employment income & generally give you some advice re possible retirement plan contributions/deductions, etc.

Customer:

Ok great, thank you for your help. One more question if you don't mind...

Customer:

In your expert opinion, are there tax benefits to operating through an LLC or S-Corp instead of being an IC? My husband is currently unemployed and I want to make sure I'm providing the best way I can

Stephen E. Grizey :

All that is really beyond the scope of what we can do in this format; all we can really do is identify what you need to address; give you some general guidelines & point you in the right direction; when you are self-employed, you really need to have an ongoing relationship with a tax adviser; A CPA can do it all for you.

Customer:

Thanks again

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