I became a 1099 employee. What does that mean really to me?

Question

Should I start saving money for taxes and if so how much? Can I claim items like my car, gas, computer , etc. all used for work on my income taxes?
I just need to understand how to get started on this. Thanks

Answer 1

If you're paid on a 1099, that means your employer has not withheld anything for income taxes.
Be prepared to make an Estimated Tax Payment on April 15, not for last year's taxes, but for this first quarter's income.
Send them a check for 40% of the money you made between January and March.

Why 40%? The "self-employment tax", which combines the employee's and employer's halves of the social security and medicare taxes, as well as your regular income tax.

Now that you're on a 1099, the IRS treats you as if you owned a company. As such, any business expenses are deductable, and what's left over after those expenses are paid is now your income.

Car - you can't claim the whole car as a deduction, but you can claim "mileage", which is the gas and depreciation combined. This year it's somewhere between 40 and 50 cents per mile, but the specific rate is set by the IRS.

KEEP ALL YOUR RECEIPTS.

Answer 2

First, you are not a 1099 employee, you are now considered an independent contractor, ie self emloyed. You will report the income on a Schedule C, Self employment. You can deduct all costs related to the income, but you will pay income tax plus self employment tax on the profit. Self employment tax is just under 14%, then your income tax depending on your tax rate. You should pay estimated quarterly tax, the first payment is due on 4/17.

Answer 3

You'll pay 15.3% self-employment tax on your net income, plus whatever your income taxes are. You can deduct expenses, but there are many limitations there, and some things can be deducted immediately, some have to be depreciated over several years, and some have to be apportioned between personal and business use. You'd be wise to talk to a CPA about what records you should be keeping, and what items you can deduct.

Answer 4

What you did become was a lost tax soul. Hopefully it wont last too long.

There is no such thing as a "1099 employee". Either you are a 1099 or an
employee. You cannot be both.

Maybe you have a multiple personality tax disorder.

Answer 5

hi i wanted to be the 1st to welcome to the wonderfull world of 1099? in this great world i recommend SAVE all your reciepts thats associated to your work and also get your self a great tax accountant. you can save for gas, car, office supplies, even food. so start grabbing receipts where ever you go. trust me my pockets are full with them & when i get home i empty them out. again welcome fellow 1099 comrad!!