First time as a 1099 vs W2

After 41 years of working as a W2 employee (first legit job was at age 11 at a pizza shop), I'm going to be a 1099 contractor for the next 6 months and I'm thinking about the deductions I might be able to make during this short period.

I already know about mileage, cell phone (device and service), home office, unreimbursed travel expenses (they are paying my travel expenses, but not mileage to/from airport), and supplies.

I'm on my wife's health insurance. We do pay a little to have me on, so I think I can use that.

What are some of the 'Oh yeah? No shit!' deductions that I might be able to take that I hadn't thought about?

 

If your job requires you to use the internet you can deduct the monthly internet bill. Any special clothes or tools/equipment needed for this job? Even if you already have the tools required, if you've been looking to upgrade or buy new equipment, now that can be deducted.

 

Interesting topic
What are the advantages and disadvantages of a company hiring (W2) versus going the 1099 contractor route besides the obvious like being able to let go a contractor without all the HR hoops? I get with short term or bounded work of a limited scope a 1099 is the way to go. If a position was available full time indefinitely would for arguments sake hiring on a 1099 be better for a company financially (assuming equal rates) than a W2 hire since the company would only be processing an invoice and not all the taxes and withholdings?

 

SEP IRA is going to be my biggest method of avoiding tax this year. I don't have any real expenses or overhead that amount to much so it's going to hurt. SEP IRA is the one place I can pay myself some of that money I'm not going to be able to touch now anyway.

 

Can't speak for a big company, but I don't intend to ever move to a payroll employee model. All of my engagements come in as contract work and not having payroll employees allows me to staff every contract according to that specific contract. My contractors often get the benefit of being double and triple booked as "full-time" when I know the workload can be managed, but they also know there is no check until I get a check. I only know how to make this work because I have implicit trust in the tight group I'm working with.

 

The position I recently took on was with a company who I have worked with in a different capacity for the last 2 years. The newly created position was designed by the parent company to be a position in Scottsdale, AZ. The CEO of my company wanted me to come onboard but I told her I didn't want to relocate. She agreed that the position didn't have to be local and took my case up to the parent company. They said the only way they would allow it was under a 6 month contract (with a nice bump in pay to make up for lost benefits). If it works out, they'll bring me on as a full time employee. I didn't feel like going job hunting again so I took it.

 

COMmunistCAST has everything (TV/Internet/Voice) set up on the 'triple play'. Not sure how to split it up.
No special tools or equipment needed other than laptop. I don't need one right now but I plan on upgrading just before the end of my contract.

 

Get on the xfinity/Comcast forum and PM one of the admins asking for a breakdown of your package charges. I called in asking for it multiple times and was promised a letter in the mail each time that I never received. Got it almost instantly on the forums though.


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There are rules regarding what can be deducted as a 1099 employee including distance from home to job site. 60 miles is what I remember but it should be easy to Google. I found very little to itemize when I switched from employee to contractor at my former employer. I based my contract on what my fully loaded wages were when I retired plus 15%. Figure your previous yearly salary / 1600 hours (taking into account for vacations and holidays) then multiply by benefit costs like health care, insurance, IRA match, etc. then multiply by your "value adder". By the time I finally quit (ie fully retired) my "va" was up to 40%....It was still a good deal for them as they could cut costs easily if they wished. No advance notice, no BS...just "here's your hat, what's your hurry"

 

Wow did you get 12 weeks of vacation and holidays?

 

Sorry.... fat fingers....1800

 

Hookers and blow.

 

Liability.

 

Entertainment and uncovered medical costs....got it!

 

Good to know. With my contract, it's 'here's your hat, you've got 30 days to GTFO unless you violate the terms...then you only got 10 days'.

 

Did 3 years as a 1099 after almost 37 years with my employer, retired December last year. I claimed 1/3 the monthly cost of Internet access (8 hours) as I used it for personal use as well. VOIP phone cost was a 100%, since I only used the phone for work. My CPA heavily advised against claiming home office, can’t remember exactly why but he was fairly adamant about it. Since it is only 6 months probably not worth it anyhow. You will need to make quarterly tax payments for that time as well.

 

If the company is paying for any of your 'expenses' like travel, uniforms, or rent for example, then you would not be able to claim those on your taxes.

As a 1099 contract labor, you are now exposing yourself to not be paid in a timely manner or not at all, depending on your situation and that could be bad if you will be dependent on the money as income to pay bills. A business legally will 'have to pay their employees' but not contract labor. You will have to deal with them to get your money... and they can also make excuses of why they don't feel to the need to pay you...

I always assume 40% to Federal & state taxes of the total amount I invoice, unless I make a big write-off that year- say for equipment or company investments like an IRA. It keeps me safe on quarterly and end of year payments.

Also, you must make a profit within the first 3 years and then 3 out of every 5 or 7 years I believe. If you don't, then the IRS will consider you as a 'Hobby' and no tax deductions will be allowed.

 

The contract specifically states how much they will be paying me and when they will be paying me. I send them an invoice and they pay me on the 1st and 15th. It's a fixed amount (paying me for the job, not for the time).
They are covering all of my travel expenses.
The pay is a bit more than what I'm paying now, so, my plan is to put my current take home amount in my checking account just like my direct deposit was and put everything else into a separate savings account that I'll continue to feed until tax time.
Assuming all goes well, I'll be back to W-2 in 6 months or less.

I realize these are all CPA questions but the BOBK (book of beeb knowledge) crushes anything an accountant can come up with.

 

You probably know this, but FICA will now be 15.3% vs. the 7.x% you currently pay.

 

You usually have to have a completely separate entrance door to the “office” that opens to the outside of the house in order to be able to claim a home office.