Independent contractor as a tutor?

Question

How much % will be taken out total (estimate) if I work as an independent contractor as a tutor? If I write off some expenses, will my check eventually amount to me working just as an employee? Also, I heard something about if I earn only $600 or less for this year, I don't have to file taxes on the 1099? What if I have other tutoring jobs with companies as an employee? Do I still have to file all my taxes then? I am planning to work at the 1099 company until I make less than $600 so I don't have to pay taxes on it. Thank you for any help. P.S. I am in the state of CA.

Answer 1

Some of what you've heard isn't correct. By law, if you make $400 or more for the year as an independent contractor, you have to report it and pay the taxes. If you work independently for a company, then if you make $600 or more they are required to send you a 1099. But even if you don't make that much, or don't get a 1099, you are still required to file and report the income, using your own records that you must keep. If you are filing a return anyway, say you have W-2 income also, the $400 minimum doesn't apply and you are required to report the side income from the first dollar.

There will most likely be expenses you can write off as an independent contractor. Again, keep good records, and keep receipts. You'd subtract those expenses from your side income before figuring tax on it. The only extra tax you pay on the side income that you wouldn't pay if you made it as an employee is paying the employer half of social security and medicare, an extra 7.65%, or actually a little less than that. Income taxes are the same, except that you can subtract your expenses from income before figuring your tax.

If you follow your plan to work at the 1099 company until you make under $600 and you don't report it, but you make enough to be required to file a return for the year, then you would be committing tax evasion which is, of course, illegal.

Answer 2

Strictly speaking, from a federal income tax point of view as a U.S. citizen you are taxable on your world wide income. However, the IRS does not require payments for less than $600 to be reported on 1099-MISC for consulting services. However, if you are paid $600 or more the payer will be required to report this amount as "non-employee compensation" in box 7 of the 1099.

At that point you will need to report the amount as income on your Form 1040 and pay income tax. Additionally, you will need to pay both the employer and employee portions of the social security and medicate taxes. That is an additional 15.3% of the gross. Finally, since you live in California this is subject to state income and employment taxes which will range from 5 to 15% depending on your income level.

All told you could potentially owe nearly half in federal and state tax, if your total income is large. If you make very little (or this is your only income) you will owe little or no income tax and will only have to pay the Social Security, Medicare, and state employment taxes.

If you have multiple employers who pay less than $600 then you will not receive a 1099 and presumibly owe no tax. However, if the IRS finds that there is a scheme to avoid reporting and there is truly a single payer you and the payer could be subject to penalties.

Answer 3

1. Nothing is withheld from what you earn as independent contractor. You have to send all the taxes to the government yourself.
2. If you earn little enough from this work, you do not have to pay self-employment tax. If you earn enough from this work you do have to pay self-employment tax.
3. If your total taxable income, including as an employee, is enough to have to file a tax return and pay income tax, then you have to pay income tax on your independent contractor work, no matter how little it is.

Answer 4

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Answer 5

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