A W2 employee is what we normally think of as a typical, salaried employee. Companies withhold their W2 workers’ Social Security and Medicare taxes. Employers also provide all the necessary tools and supplies for W2 employees. W2 employees are typically reimbursed for business expenses they incur over the course of their employment. Benefits like health insurance, retirement contributions, and flexible spending accounts may be available to qualifying employees.
If you received a 1099 form from your employer then you are considered an independent contractor, sole proprietor, sole owner of an LLC, or a self-employed person. This means you did not pay taxes or have taxes taken out of your paycheck throughout the year. Actuary Advisors is an expert at assisting independent contractors and other self-employed individuals in minimizing their tax debt with the appropriate credits and deductions.
There are many careers that may be considered self-employment. Many of these careers involve setting up an incorporated entity to get the true benefits from your business. We not only assist in helping our clients in incorporating their business, but also using the incorporation to properly file your taxes. Taxes work the exact same way for independent contractors and freelancers. As long as you’re self-employed, the IRS only looks at you through the lens of your business entity. So if you understand how your entity type works, you’ll know how your taxes work.
Barbers/ Hair Stylist/ Nail Techs/ Cosmotologists
As a freelancer, you depend on your clients to file Form 1099-MISC for you. When you total that 1099 income up, you’ll get most of the income that you need to report on your tax return (but not all—if a client paid you less than $600 in the tax year, they won’t have to file a 1099.) The deadline for getting a Form 1099-MISC to a subcontractor is January 31st, 2020.
Uber/ Lyft/ Grubhub/ Doordash
If you’re considered a self-employed person, you’re typically required to pay self-employment tax in addition to federal income tax. The self-employment tax, which includes Social Security tax and Medicare tax, is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. The self-employment tax rate is 15.3%, consisting of 12.4% for Social Security and 2.9% for Medicare.
Freelance/ Bands/ Studio/ Performance Artists
As an independent contractor, you can deduct many of your business expenses such as the cost of a computer, printer and other equipment you use in your work, plus the cost of work-related phone calls and mailings, office supplies, duplicating, advertising and business travel. You can also deduct legal and professional fees for your business, books and publications you purchase for your business, and the cost to rent an office space.
Flooring/ Roofing/ Electrician/ HVAC
The IRS won't correct your return if you fail to claim a deduction that you qualified for. So it's in your best interest to be aware of the items you can write off as a cost of doing business. That's where Actuary Advisors comes in. While there are many tax benefits of being an independent contractor, we make sure that all the necessary deductions associated with your work are include on your tax return.