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Contractor Position with 1099 - Tax Questions

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rated:
Greetings FW,

I recently got a job offer to provide services as an independent contractor where no tax will be withheld from my pay. I will be paid $75 an hour. The position ends around July 1, 2018

I also have a W2 job. I'm married filling jointly and for the 2016 year our total income was around $134,000.

This new job requires about a 100 mile commute. I expect  to go there 1-2 times a week. There is some flexibility to do some of the work from home. I'm expecting to put in about 15 hours a week or so between work at the location and at home.

Questions:
1. Is the commute I make to this position tax deductible? I know a regular work commute is not but am not sure if this is. If it is how do I record how many times I commute there for IRS records purposes? Note that on some days I will be taking vacation days off from my regular job to head out to this new job - not sure if that matters.
2. My wife and I share a car between us as we work at the same location but we were planning on purchasing a new car. With this new job, we will be moving ahead with the purchase sooner than later. Can I claim part of this purchase for tax purposes for this job?
3. I'm going to be making quarterly tax payments which is fine - I plan on paying $25 an hour (33%) in estimated tax to cover my liability in this area. I have an account set up as I recently had to make a payment due to gains from a stock I sold. Do I need to do anything else to ensure that I'm paying the necessary taxes on time?

Thanks for any assistance. This is my first 1099 type job as I've been a W2 salary worker for the last several years.

 

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rated:
1) I believe only if you deduct the car usage as a business expense.
2) Look up something called the 179 exception. If you plan to use the car at least 50% then this might help you out.
3) I'm not sure on the amount you need to pay, but yes paying quarterly will help you.

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elfrozo said:   I'm going to be making quarterly tax payments which is fine - I plan on paying $25 an hour (33%) in estimated tax to cover my liability in this area. I have an account set up as I recently had to make a payment due to gains from a stock I sold. Do I need to do anything else to ensure that I'm paying the necessary taxes on time?
  You dont necessarily have to make quarterly tax payments. Since you and your wife a regular W2 job, one option is to simply increase your withholding at your W2 job (fill out form W4 and add a suitable amount to "additional amount" in line 6 of the form).

ETA: Based on your 2016 income and what this side gig will fetch in, you will most likely be in the 25% federal tax bracket. However, you will also owe self-employment tax of ~15.3% (and get to deduct half of the self-employment tax from your AGI).
Dont forget to take care of state tax as well (if you state imposes one).

rated:

ETA: Based on your 2016 income and what this side gig will fetch in, you will most likely be in the 25% federal tax bracket. However, you will also owe self-employment tax of ~15.3% (and get to deduct half of the self-employment tax from your AGI).
Dont forget to take care of state tax as well (if you state imposes one).

  Sorry I'm not sure if I understand. I will have to pay an additional 15.3% on top of the 25% I"m going to be paying?

rated:
elfrozo said:   

ETA: Based on your 2016 income and what this side gig will fetch in, you will most likely be in the 25% federal tax bracket. However, you will also owe self-employment tax of ~15.3% (and get to deduct half of the self-employment tax from your AGI).
Dont forget to take care of state tax as well (if you state imposes one).

  Sorry I'm not sure if I understand. I will have to pay an additional 15.3% on top of the 25% I"m going to be paying?


Yes, for Social Security/Medicare taxes. In your W2 job, you pay half and your employer pays half. For your 1099 gig, you have to pay both (though you do get to deduct some, as fwuser12 mentioned).

rated:
elfrozo said:   This is my first 1099 type job

Most likely when you get on the job, you'll learn that you really aren't a 1099. That's fine. Let things play out, then when the job's over, file a contractor vs employee complaint, and stick the stupid employer for your taxes that they didn't pay.

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From TT site:

if you travel to and from a temporary work location (where your assignment is expected to last no more than 1 year) outside your metropolitan area, you can claim commuting expenses. You can also claim commuting expenses to and from a temporary work site, regardless of location, as long as your main workplace is elsewhere.

You're also allowed to deduct commuting expenses between multiple job sites during the same day. For example, if you go directly from your day job to your evening job, you can deduct the commute between those 2 job sites. But if you first go home and then leave to go to your second job, that can't be deducted.

rated:
rascott said:   
You're also allowed to deduct commuting expenses between multiple job sites during the same day. For example, if you go directly from your day job to your evening job, you can deduct the commute between those 2 job sites. But if you first go home and then leave to go to your second job, that can't be deducted.
 

  Unless you also work from home, and thus make sure to start 'working" at home before heading off to the other location to finish up for the day.

Those Turbo Tax rules are regarding expenses incurred from regular employment.  In OP's case, he is working for himself out of his own "office" - he isnt commuting to his job, he's traveling to a client's location, and it is clearly a business expense. The simplest way is to log your miles driven for this side business, and use the IRS mileage amount (53.5-cents/mile in 2017). 

rated:
doveroftke said:   
elfrozo said:     Sorry I'm not sure if I understand. I will have to pay an additional 15.3% on top of the 25% I"m going to be paying?
 

Yes, for Social Security/Medicare taxes. In your W2 job, you pay half and your employer pays half. For your 1099 gig, you have to pay both (though you do get to deduct some, as fwuser12 mentioned).
 

  One example for how big a difference it would make if folks were to "pay" SS tax just like income tax (instead of it being an automatic deduction from your paycheck). It also highlights how we tend to not realize that between SS and medicare, 15.3% is what goes into those funds. You pay only one half of it but it is still real dollars out of the employer's pocket for the other half so that the full 15.3% goes into the SS/medicare funds.

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