Is 1099 worth the extra work?


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Old 10-31-23, 03:30 PM
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Is 1099 worth the extra work?

I was offered a great job but would basically be a contractor with a 1099. I have never had to do this but the guy explained to me that I can write off vehicle expenses, mortgage expenses because I will be working from home part of the time, lunch because I'll be on the road when I eat, any new tools or equipment Etc that I'll be using for the job. I feel like it's not that simple if all of that stuff even can be written off. I feel like he was trying to sell me the position which sounded good but I feel there's more to it. Let's say for instance as how he explained I purchase a new work vehicle and use it 75% of the time for work. He said I could write off 75% of the car loan. Is this in fact true? I know I will need to hire an accountant to do my taxes but I like to find out as much as I can before diving head first into this position. Thank you
 
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Old 10-31-23, 04:43 PM
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I work on a 1099 and it's a lot more complicated. You can deduct job mileage but you need to keep track, as the IRS will want to know how many work miles out of how many total miles. If you declare a home office, then things like mortgage interest and utilities are on the table in the same percentage as the office is as a percentage of your whole home. Keep in mind, the space for your office has to be exclusively for work use, it cannot be deducted if it's a mixed-use space. I have always done my own taxes when a W2 employee but now pay someone to do them. Good news is that counts as a business expense as well since I only pay because I'm a 1099 worker but the money is still gone.
 
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Old 10-31-23, 07:12 PM
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Is a 1099 employee considered self-employed?
If payment for services you provided is listed on Form 1099-NEC, Nonemployee Compensation, the payer is treating you as a self-employed worker, also referred to as an independent contractor.


You'll be responsible for your own insurance and workmens comp.
 
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Old 10-31-23, 07:55 PM
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Let's say I buy a new $100 tool and write it off. Will the entire $100 come off the taxes I owe? Wish I could ask an accountant a few questions without hiring one.
 
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Old 11-01-23, 01:07 AM
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It depends on the tool - can you justify its ownership by the company over by you as the individual? For instance, I had to buy a new cell phone when I started this job because the one I had did not support group chat, which is how my company generally communicates. Since the reason for the purchase was 100% due to the job, I deducted the whole amount from my taxes. That said, since I use the phone for both personal and business use, I only deduct part of the monthly service charge.
 
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Old 11-01-23, 03:56 AM
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Also when you are self employed you pay all of your SS and Medicare tax - not just half as you do as an employee. It's important you keep good records as the IRS wants to tax you on the full amount unless you can prove otherwise.
 
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Old 11-01-23, 05:49 AM
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Here2Learn, at it's core you've asked a simple question. From a financial perspective, reduce the offered compensation by the additional social security and contractor insurance you'll have to pay and compare that to what you want to earn.

Being on a 1099 means you are an independent contractor, i.e., self employed. As such, you lose all of the benefits available to employees. These include employer social security contributions and workers comp protection. Independent contractors are also responsible for their own health insurance and other benefits. In addition, keep in mind that independent contractors only get paid when they work, so no paid sick days, vacation, or holidays.

One more very important point, independent contractors can be sued for the mistakes they make. For example, if a fire accidentally starts you can be liable for it.
 
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Old 11-01-23, 06:44 AM
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My health insurance is already through my wife. With the new job I will make $15k more but without having taxes taken out. So I guess the main point would be after its all said in done and I hold onto 30% for taxes I then would be making $3k less than current position. The main perk of this new job is I can work whenever I want so no hassle with asking for time off for example dentist appointment.
 
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Old 11-01-23, 07:14 AM
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There are a lot of perks to being self employed but you must be disciplined. One might say now you are the boss but in reality now you have many bosses [the customers]
 
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Old 12-28-23, 05:31 PM
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For independent contractors the IRS recognizes your "tax home" as where you spend the preponderance of time working. For example you live in Keene NH and spend 40$ of your working time at one client company in Fitchburg, MA, you spend 30% of your time at a client company in Brattleboro VT, and 30% of your time at home in Keene. Your tax home is Fitchburg MA and travel from home to there is not deductible.

In the above scenario you pay Mass. income tax for the work you do in Fitchburg and Vermont income tax for the work you do in Brattleboro.

Considering just the tax consequences (Social Security, Medicare) and setting aside money to correspond to, workman's comp and, unemployment, I would say that for a job with $100,000 of gross annual employee pay, the independent contractor doing the same work for the year should get $125,000.
 

Last edited by AllanJ; 12-28-23 at 05:48 PM.
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Old 12-29-23, 06:25 AM
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I'm self-employed and it is well worth the initial trouble to set up the business and learn the laws. SBA.gov is great resource, and your state economic development association will likely provide direct assistance (major goal of state EDA is to help you establish a physical business address, tell them that is your ultimate goal after you get established). My company compensation plan is heavy on benefits with reduced taxable compensation. SEP IRA annual limit is $61K as example, and I like to see my employees reach this limit every year. I'm the only employee in my company btw.
 
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Old 12-29-23, 07:17 PM
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ďLet's say I buy a new $100 tool and write it off. Will the entire $100 come off the taxes I owe?Ē

I believe the correct answer is, the $100 reduces the ētaxable incomeē, not the tax. So if your gross income is $5000 and you have business related deductible expenses totaling $1000 (which would include the $100 tool), your net taxable income is $4000.

Can you deduct a daily routine meal? A meal for a client or for a business purpose might be deductible, but you have to eat and a regular lunch is likely not deductible just because youíre 1099.
 
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Old 12-29-23, 08:38 PM
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"you have to eat and a regular lunch is likely not deductible just because you’re 1099"

I always look at what is deductible by linking it to the business but the opposite works well, as stated above - if you would have made the purchase (or a similar one) without the business, it's going to be difficult to claim it as a business expense.
 
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Old 12-30-23, 04:47 AM
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Generally small purchased related to your work are deductible in full the year you make the purchase but some higher priced items are prorated over several yrs [often dictated by the life of the item]
 
 

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