Accounting For 1099 Contractors
Accounting For 1099 Contractors By far the largest group of people we see with IRS problems are the 1099 Contractors. While employees have their half of the payroll tax withheld by their employer and the other half paid by their employer, contractors are completely responsible for their own payroll tax that tops 15% of their net business income. And on top of that, they have to pay ordinary income tax. And yikes, there is no employer to withhold the tax from a paycheck. This is where trouble begins!
Yes, contractors get tax write offs that employees don’t get and that sometimes makes being a contractor more appealing. But there are pitfalls! If you are a contractor, we strongly urge you to make estimated tax payments during the year to the IRS. They’re only required to be made on a quarterly basis, but we find that saving for 3 months just to pay the IRS is quite difficult for some. So we generally set our contractors up in the IRS electronic payment system known as EFTPS. It allows our clients to make payments as often as necessary to stay out of trouble!
And there’s more…contractors are responsible for record keeping and reporting of income and expenses associated with their earnings. This requires a whole new set of skills! But help is available. Here at Fix-It Accounting, we will teach you how to manage it all. We are not just your tax preparer but also your knowledgeable partner.
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