Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

Im an independant contractor who hires other sub-contractors.

I'm an independant contractor who...
I'm an independant contractor who hires other sub-contractors. My income is primarily W-9 income, but I also pay my workers via W-9. Is there any way to restructure my company or operation in order to minimize my tax liability here?

For example, one job paid my company $11,150. $9350 of that was paid to my sub-contactors. By the time I paid taxes on that W-9 income, I was in the hole by several thousands of dollars.
Show More
Show Less
Ask Your Own Tax Question
Answered in 1 minute by:
10/14/2013
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,886
Experience: 15years with H & R Block. Divisional leader, Instructor
Verified

Robin D. :

Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.
By your statement independant contractor who hires other sub-contractors I was under the impression that you did not have employees.

Robin D. :

If these are sub contractors what taxes are you paying?

Customer:

That's the big question!

Customer:

So all my income is reported by my clients' W-9 forms that are sent to me.

Customer:

But most of that income is spent on sub-contractors.

Customer:

I think what has thrown me is how it is reported in my tax software.

Customer:

For instance, my software keeps a running total of how much I owe the government...

Robin D. :

Have you been treating this workers as employees and withholding tax and paying the employer portion of same?

Customer:

No.

Customer:

All are reported as nonemployee compensation.

Robin D. :

If they are not your employees (and we can go over that in a sec) then the fact that all the amounts are reported to you as wages will work out when you file because what you issue to them by means of a 1099MISC

Robin D. :

is subtracted from your Gross

Robin D. :

You will not be paying tax on the amounts you report as paid to these subs

Robin D. :

that will be an expense that you use when you file

Robin D. :

DO you file a Schedule C

Robin D. :

for your business income?

Customer:

Yes

Robin D. :

Then on the Schedule C you will show the expense

Customer:

Correct, line 11 on schedule C.

Robin D. :

Contract labor includes payments to persons you do not treat as employees (for example, independent contractors) for services performed for your trade or business. This is shown on Line 11 of the Schedule C

Customer:

All of that information shows up.

Robin D. :

So your software is not accounting for the deduction?

Customer:

It doesn't seem to...

Customer:

Here's what happens.

Customer:

My taxes are completely done except for the W-9 entries.

Customer:

(for my sub contractiors)

Customer:

I enter in $9350 paid to an employee, and the amount owed to the Federal gov only drops by $2140.

Robin D. :

First you should not be entering anything under employees. These are contract labor and 1099MISC are issued to them. I know you ask for the W9 because they are US persons and you need theinfo to report but that is as far as teh W 9 goes for these people

Customer:

Yes, sorry. They are not employees.

Customer:

These amounts are appearing on line 11 of Schedule C.

Robin D. :

I think when you are entering "employee" items the amount is only dropping a little because teh program may be still calculating your portion of employer taxes

Robin D. :

If they are appearing on 11 and subtracting out then you would only be paying tax on teh remaining amount

Robin D. :

That would be income and self employment tax

Robin D. :

but just for yourself

Robin D. :

Look at your Schedule C and check to make sure that your line 31 is the true Net Profit

Robin D. :

it should be the Gross less your expenses (with the contractor payments from you included)

Robin D. :

Then I can tell what your SE tax would be on that

Robin D. :

Changing your business structure at this point (even to S corp) may not be the best thing

Customer:

I am set up as a sole proprietor.

Robin D. :

You would then need to file W2 for you because of the requirement to pay a salary and the portion of your employment taxes would need to be paid as well as more filing then you may want to complete

Robin D. :

I think if you want to stay simple

Robin D. :

you shoudl stay as sole prop

Robin D. :

you are only having to file teh 1099MISC to contractors

Robin D. :

your own Schedule C

Robin D. :

and the SE

Robin D. :

S corp, if you restructured woudl be more involved

Customer:

Right. That makes sense.

Robin D. :

taxes would still be owed just coming from different places

Robin D. :

I like to explain it as different pckets, same pair of pants

Robin D. :

Do you feel better about seeing that the expense is being shown?

Customer:

I do.

Robin D. :

Great

Customer:

Just the way that it calculated it made me feel like I was being ripped off.

Robin D. :

I know

Customer:

I didn't even think about it calculating self-employment tax into it.

Robin D. :

People forget about the SE tax

Robin D. :

And remember

Robin D. :

you are getting half of that on your 1040 as an adjustment (the SE tax)

Customer:

Is there a standard way to calculate how much SE tax you will pay?

Robin D. :

The easiest way is to plug in the numbers on the SE . The rate consists of 12.4% for social security and 2.9% for Medicare taxes for 2013.

Customer:

Got it.

Customer:

Thank you for your help today.

Robin D. :

You are most welcome.
Your positive rating is always thanks enough.

Robin D. :

I really enjoyed working with you – please feel free to request me again when you come back to ask another question.

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,886
Experience: 15years with H & R Block. Divisional leader, Instructor
Verified
Robin D. and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask Robin D. Your Own Question
Robin D.
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,886
15,886 Satisfied Customers
Experience: 15years with H & R Block. Divisional leader, Instructor

Robin D. is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

15,886 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
I'm a home improvement contractor in Pennsylvania filing
I'm a home improvement contractor in Pennsylvania filing Schedule C on my 1040. Along with federal and state income tax, we also have a county "Earned Income Tax" and a "Local Services Tax". I had fil… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,220 satisfied customers
Figure out how much is my tax liability + my capital gains +
Figure out how much is my tax liability + my capital gains + depreciation recapture tax … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Can an independent contractor/ 1099 worker's wages be
Can an independent contractor/ 1099 worker's wages be garnished in Texas for federal student loan debt?… read more
abci168
abci168
Principal
27 satisfied customers
Does a go fund me account create a tax liability or is it
does a go fund me account create a tax liability or is it considered a donation? It is for assistance in covering medical bills. … read more
abci168
abci168
Principal
27 satisfied customers
I am currently working as a contractor for a company I
I am currently working as a contractor for a company I retired from in 2015. Can I claim my expenses on future tax returns. What qualifies me to be considered a contractor? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,473 satisfied customers
Sell of property tax liability. Ca. Bought home 25 yrs ago
bought home 400,000 selling 2.5 mil. Invested 500,000 owe 800,000… read more
Richard
Richard
Tax Attorney
Doctoral Degree
4,310 satisfied customers
My friend owes more than 25000 in tax liability for year
My friend owes more than 25000 in tax liability for year 2014 and filed his taxes in year 2017. Now the penalty and interest alone is around 15000 (including state's). Is there any possibility to get … read more
Robin D.
Robin D.
Senior Tax Advisor 4
15,886 satisfied customers
When does the Florida sales tax liability due to the DOR'
When does the Florida sales tax liability due to the DOR' invoice & delivery or title registration with the county tag office? … read more
abci168
abci168
Principal
27 satisfied customers
Exploring Florida Sub S conversion to LLC and have found
Exploring Florida Sub S conversion to LLC and have found info indicating "The IRS ruled the conversion to an LLC followed by an election to be taxed as a corporation for federal tax purposes would be … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I am looking for information about my tax liability if I
I am looking for information about my tax liability if I were to move to sweden on my retirement incomes. I think I have the USA portion figured out, it is the Swedish tax that I am concerned with … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I'd like to know the tax liability of having a trust fund on
I'd like to know the tax liability of having a trust fund on my name? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I am trying to figure out the tax liability if I utilize my
I am trying to figure out the tax liability if I utilize my Thrift savings account to pay off my mortgage. … read more
ABC Accounting Group
ABC Accounting Group
Bachelor\u0027s Degree
682 satisfied customers
I'm looking to understand my tax liability with incentive
I'm looking to understand my tax liability with incentive stock options vs. non-qualified stock options.… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
I do have outstanding tax liabilities and is wondering if
I do have outstanding tax liabilities and is wondering if there would be any issues if I dissolve my LLC before settling my tax liabilities.I have:An LLC in Florida An LLC in New York and a foreign en… read more
Robin D.
Robin D.
Senior Tax Advisor 4
15,886 satisfied customers
I am an independent contractor with sub contractors should
I am an independent contractor with sub contractors should in file an LLC … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I want to find sub-contractor social security number,
I want to find sub-contractor social security number … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
If I am a 1099 sub-contractor and the contracting company
If I am a 1099 sub-contractor and the contracting company that pays me carries the workers compensation deducting 6% from each of my pay applications, am I allowed to deduct those values, or can I onl… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
My income tax liability was eliminated through chapter 7 but
My income tax liability was eliminated through chapter 7 but recently I have been receiving collection letters, how should I respond? … read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x