Taxpayer asks:
Several elderly friends have asked me to help them with administratrive work in there home. I would probably do this on an ongoing basis and I am sure each would end up paying me more that $600 a year. I would report all of this money (Schedule C I think) but am concerned for the people I would be doing the work for. Do they have to issue a 1099 for the work I would do for them? Could I just report the money quarterly without ever getting a form from them and have it be legal, I don’t want to get them into trouble?
Taxgirl says:
If I understand it, you’re going to be kind of like a Girl Friday? Opening mail, paying bills, that sort of thing, at times that are convenient for you – and for a number of different people?
Assuming that you can’t be classed as a household employee (which I think you’re not if my understanding of your situation is correct), then there is no obligation for your customers to report payments made to you.
Forms 1099-MISC are generally issued when payments are made in the course of trade or business. Personal payments are not reportable. If your customers are making payments to you for services in much the same way that they would pay their hairdresser or a kid that occasionally mows the law, there’s no reason to submit a 1099 to you.
Again, this assumes that you’re self-employed and that you control how the work is done. A self-employed worker also usually provides his or her own tools and offers services to the general public in an independent business – which sounds like what you’re doing.
If, however, you could be classified as a household or other employee (which would result in a form W-2 issued to you), or if you’re performing services for your customer’s trade or business (which would result in a form 1099-MISC issued to you), that’s a different story. You can read more about household employees here.
I hope that helps. And good luck with your business!
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
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Don’t get too excited. It’s not a huge tax break – but it’s not a bad one either. A bill that was rushed through recently passed in Congress, known as The Worker, Homeownership and Business Assistance Act of 2009, will allow businesses to apply losses retroactively.
The bill, which was tacked onto the homebuyer’s credit extension/expansion, would allow businesses which suffered losses in 2008 or 2009 to retroactively apply those losses to any five years prior to 2008. Known as a “net-operating loss carryback” or “NOL carryback”, those losses could previously only be carried back for two years. It’s an expansion of the NOL provisions under the American Recovery and Reinvestment Act (ARRA).
There are some restrictions. The one that’s been getting the most press bars businesses which have accepted TARP money from utilizing the expanded NOL carryback. That is, of course, so that Congress appears to be taking a hard-line against those businesses (all while allowing them to engage in the same kinds of risky behaviors as before).
The expansion is estimated to cost just over $10 billion over 10 years. The homebuyer’s credit is estimated to cost about $10 billion over 10 months.
Is it just me, or does this feel very “Old MacDonald” all of the sudden?
Here, $10 billion, there $10 billion, everywhere $10 billion…
Taxpayer asks:
While putting together a new group of guest posters for my site, a tax question hit me! Is the time I spend guest posting on other blogs for promotional purposes tax deductible? i.e. I don’t get paid for the post – my only compensation is the link back. But I could be getting paid for the post… so is the amount I charge for that service a marketing business expense?
If it is – I’m sure you have many readers that would be interested!
Thanks so much!
Taxgirl says:
Gosh, I sure wish it was – since I spend so much time writing for other publications and blogs – but it’s not. The IRS likes to match items of deduction with items of income. If they allowed a deduction for the cost of your time, then they’d require you to value the same for purposes of attributing income (the “value” of the article). But they don’t. Since there’s no income component, there’s no deduction.
Even though it feels odd, this is consistent with the IRS’ position on the treatment of services when there’s no compensation throughout the Tax Code. You can’t deduct your time for volunteering, even though it’s valuable, or time spent on services for which you didn’t get paid because you were “stiffed” by a client (hey tax geeks, most of my readers are cash based so no need to write in to tell me how this isn’t *quite* true for accrual based taxpayers).
I do have one piece of good news, though. Any out of pocket expenses related to the piece (i.e. money spent on paid art, research and the like) can be deducted as promotional expenses. So all is not lost!
Thanks for writing in – and good luck with the blog! Guest posting is a great way to promote your blog or services. I’m always happy to accept ideas for guest posts at taxgirl – just drop me a note!
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl! – Now on Facebook!
Taxpayer asks:
I’m a recent college grad working 2 full-time jobs and doing some free-lance work on the side. I have recently been asked to provide a w-9 for a $300.00 invoice I sent to a client, who happens to be my old boss. I was wondering, how much money should I withhold to pay my taxes? Also, do I have to file quarterly, or can I wait until the end of the year?
Thanks so much!
Taxgirl says:
To the extent that you have proper withholding on your full time jobs, you won’t need to worry about estimated payments for income related to those.
However, with respect to your freelance job, you may need to make estimated payments. The general rule is that you need to make estimated payments if you expect to owe more than $1,000 in tax and you expect your total withholding and credits for 2009 to be less than the smaller of:
- 90% of the tax to be shown on your 2009 tax return or
- 100% of the tax shown on your 2008 tax return.
There is an exception, which I’ll point out especially since you note that you’re a recent college grad: You do not have to pay estimated tax for 2009 if you had no tax liability for the full 2008 tax year (partial tax years don’t count). You had no tax liability for 2008 if your total tax was zero or you did not have to file an income tax return.
With respect to the timing of the payments, you should pay in four equal installments:
Note that you don’t have to make that 4th payment in January if you file your 2009 return by February 1, 2010, and pay your total tax with that return.
To figure out how much to pay, you have a couple of options:
- Estimate your tax due for the year 2009 and pay at least 90% of the tax – just divide 90% of your estimated tax liability into four equal installments.
- Pay 100% of prior year tax, or 110% if your prior year adjusted gross income over $150,000.
You can figure how much to pay using the estimated tax worksheet found on the form 1040-ES (downloadable here as a pdf). You can also use a software package like TurboTax to figure the tax for you (I highly recommend this option). The form 1040-ES also explains where to send your payments.
If all of this seems much too complicated, you can always ask your employer to simply withhold a little more on your paycheck so long as the numbers work out.
One more note: There is a quirky provision in the 2009 stimulus bill that provides some relief for those who have to pay estimated tax. If your 2008 AGI shows that at least 50% of your income came from a “small business” (fewer than 500 employees) and your AGI is less than $500,000, you can pay just 90% of your prior year’s tax to avoid a penalty instead of 100% – the 90% also applies to the those with AGI more than $150,000 (meaning that you can pay 90% instead of 110%).
Estimated payments can be tricky but don’t panic. There are lots of opportunities during the year to “fix” any bad estimates (for example, if you’re making lots more than you planned) and safe harbors apply for those taxpayers subject to the estimated tax for the first time. Once you start making estimated payments, it’s pretty easy to figure it out for the next year: usually the first year is the most difficult (that’s why they have the safe harbors!).
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl! – Now on Facebook!
