This is my first year as an indpendent contractor, and my tax professional says I owe...?

Question

I was expecting to get about 2500 back in earned income credit, but they are saying i owe 300. I only made 23,500 and I had 8000 in expenses. I didn't pay in my medicare or ss through the year, but the other contractors say that they still always get a big refund as long as they don't make over 45000. Is H&R block screwing something up? Or should I just take it like a man....

Answer 1

You'll owe around $2300 in self-employment tax on your net schedule C income of $15,500. You don't give enough info to figure the rest of your tax. If you are married filing a joint return with one dependent child, you wouldn't owe income tax and would get an EIC a little bigger than your SE tax so should still get a small refund. If you're married filing joint, 2 kids, you should get a couple thousand back. If you don't have kids, whether you're married or single, then you'd owe quite a bit since you would not get EIC.

If you have a couple kids and are filing a joint return, then yes something sounds wrong. Post again with your filing status and whether you have kids and if so, their ages and if they live with you, and somebody can figure it closer. Also, if you itemize, give an idea of how much your itemized deductions total. I'm not talking about your business deductions, you already said around $8K on that.

By the way, CPA's are tax professionals. To use that name with many H&R preparers is a stretch.

Answer 2

Yes, you owe quarterly tax payments BUT if you had NO tax liability for the previous year the penalties are waived. Just looking at your rough figures I don't see a tax liability.

You probably should have just bought Turbo Tax (not Tax Cut its owned by H& R Block) and did your own taxes. It might be worth an additional $20 for the software to see if you could do them. Most of the people employed by Block aren't accountants or even college grads.

Answer 3

HR could be right, but I give them a big thumbs down. Did you pay several hundred dollars to them? You could do your own taxes with some good tax software for less than $100. Why don't you ask a contractor friend to compare notes and see where he saved and you had to pay. Maybe he is doing something you need to do, or learn something for next tax year, or maybe you'll find a mistake.

Answer 4

Don't use Turbo Tax or H&R Block. I used to be a tax preparer and neither are good. I've seen more returns messed up by both of those "preparers" than anything else. Plus, H&R doesn't keep copies of past returns, so if you lose yours, you're basically screwed.

Hate to put down your buddies, but its likely they are messing up or not reporting things on purpose. It happens a lot with independent contractors and 1099s.

Just please avoid Turbo Tax.

Answer 5

Did you make any estimated payments through the year? If not then your EIC paid the majority of your taxes for you. Being Self Employed you are required to make Quarterly Estimated payments. just like wage earners you are required to pay as you earn
http://www.irs.gov/taxtopics/tc306.html
http://www.irs.gov/businesses/small/index.html

Answer 6

LOL @ H&R Block. Isn't that where the people who can't get into a tax firm or start their own tax firm go to work? Those stores that open up in Walmart during tax season?

Try going to an experienced tax accountant and not an unexperienced one.

Answer 7

Not quite sure, but if you do not send in payments during the year I think there is a penalty. There is also self employment tax.

Answer 8

GO SOME PLACE ELSE