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USTaxAdvising
USTaxAdvising, Accountant
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I am 38 years old. I make about 24000/per yr. I am in sales

Customer Question

HI
I am 38 years old. I make about 24000/per yr. I am in sales and my employer usually does what called a 1099 (independent contractor)
But, with me I have asked him to just do the taxes for me like a (w2) per paycheck because I do not know much about the 1099 situation.
I do not understand completely the complexes of both areas and what is more valuable.
I am head of my household and a single parent (and I care for my mom). Normally because of this, during tax season I obtain a great refunds (child credits and such)
(My first question would be: if I do file as a 1099 : will I still get that child credit benefit?)
I am inclined to do the 1099 because of the things that I have heard in terms of benefits:
I was told:
I can write off my clothes (Im in sales)
I can write off meals with clients
I can write off the gas and car since I use this to get to my sales employment.
Please help me understand which route is the best.
Submitted: 2 years ago.
Category: Finance
Expert:  USTaxAdvising replied 2 years ago.

Hello,

I can help you with your tax questions today.

if I do file as a 1099 : will I still get that child credit benefit? - Yes, the fact that you would receive a 1099 vs a W-2 would not change the child credit benefits you receive. The credits here are based on your adjusted gross income and taxable income which would be the same whether you received a 1099 or a W-2.

I was told: I can write off my clothes (Im in sales) I can write off meals with clients I can write off the gas and car since I use this to get to my sales employment. - Yes this is correct. As a 1099 recipient you are treated as your own employer and as such you are most likely operating a trade or business. All reasonable and necessary expenses to carry on your business are deductible under Internal Revenue Code Section 162. This would include meals with clients, travel to and from work related destinations (personal travel is not deductible), clothing required for the job so long as it is not also used personally, etc.

One thing to be careful of here is whether or not you would be deemed a contractor or employee. Employee's receive W-2s and independent contractors would receive a 1099. The IRS has strict rules when making this determination see link here - http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee

Note that your employer should be making this determination as well.

The 1099 route is probably the most tax advantageous vs the W-2.

I hope this provides the clarity you were looking for. Please let me know if something is not clear and I will get back to you as soon as I can.

Best regards,

Customer: replied 2 years ago.
I am going over the link you sent. Thank you.
May I ask., what types of step must I take to become independent?
1. Do I need to get a general excise tax lic.
2. How often do I pay my taxes?
3. What percentage must I take out?Is there a place or a book that can teach me all of these things? Maybe taxes for dummies?
Expert:  USTaxAdvising replied 2 years ago.
Hello,
There isn't really anything that you need to do to "become" an indepedent contractor. Basically you would just go into business for yourself. You would get a business license from you local municipality and open up a bank account.
1. It depends on your local jurisdiction. Some require it and some don't. I would recomend looking up your local area's chamber of commerce for guidance.
2. Taxes would have to be paid in quarterly - see attached for information and due dates - http://www.irs.gov/pub/irs-access/f1040es_accessible.pdf
3. It really depends on how much money you will earn. Please have a look through the 1040ES document. The minimum would be 12.6% which should cover your Self Employment taxes.
Here are some links which should help give you some information.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed
Best regards,