Incorporation question?

Question

I am currently working on a 1099 basis. My employer does not take out any taxes. If I was to incorporate now, can I report the income from previous months under my newly formed corporation in April?

Answer 1

1099s are not illegal. If the company doesn't take out taxes then you are responsible for holding them out of your pay so that you will have your money at the end of the year when you file your taxes. Any income earned from previous months will be reported under your name, after you incorporate, the date that it goes in effect will start your "new" income.

However, I don't know why you would want to incorporate. You have to pay major taxes when you do that. Maybe you should speak to a CPA to receive the best advice for your situation.

Answer 2

Where I live, "working on a 1099 basis" is called working under the table, and it's illegal, but done all the time.

That said, everyone in this country (the US) must pay taxes, thus if I were you (considering that you'll owe back taxes for any that your soon-to-be-former employer didn't take out, and considering that the employer would be in some trouble) I'd pretend that all is right with the world.

Move forward with your new corporation in April, paying current and future taxes. If anyone asks about the other tax, under your previous employer...you had no idea that you weren't paying the state and government. Wink Wink.

Good luck :)

Answer 3

No the corporation would only report income that is paid to it. The previous income was paid to you.
You also really need to consider why you would want to incorporate. Aside from some minor employee benefits there is no cost savings from operating as a corporation. Unless you can save a couple of thousand dollars in taxes incorporating will cause you to be out of pocket more cash.