I'm basically working as an independent contractor, my business tax receipt states "public service or repair, non specific". I will be working managing a used car lot and being payed a percentage of the profit of the dealership, and my paychecks will have no taxes taken out of them. I will be "1099'd" at the end of the year and then have to figure out how much i owe in taxes. I really have no idea what all is entailed with doing this, and my boss isn't being much help. I'm concerned that if i set up a business checking account i will be taxed on my income, and then taxed on paying myself, thusly being double taxed. Obviously i would like to avoid paying as many taxes as possible, and i plan on writing things off like a percentage of my apartment rent(as my "office"), all of my gas, car maintenance etc, is there anything else that i can justifiably write off? My other concern is until the end of this year i am still classified as a dependent due to my parents paying my tuition(God bless them), and i am very afraid of the tax consequences of that, as well. Basically i'm just clueless and would like for someone to point me in the right direction. You would think in my senior year as a business administration major i would know this stuff, but for some reason the college doesn't deem it that important??? I have also not had much luck trying to find someone at the university who was willing to help me, which i also found odd. I thank you for your time,
Ryan

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83 300SD.......sold
96 integra SE....sold
99 a4 quattro....sold
2001 IS300.......sold
2002 330i.........current.
2004 highlander limited....current.

Nobody in the business school (I am assuming uor college has a business school) would help you? I would think thet somebody there would be interested in your situation as a learning experience if nothing else.

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" We have nothing to fear but the main stream media itself . . . ."- Adapted from Franklin D Roosevelt for the 21st century

OBK #55

1998 Lincoln Continental - Sold
Max 1984 300TD 285,000 miles - Sold
The Dee8gonator 1987 560SEC 196,000 miles - Sold
Orgasmatron - 2006 CLS500 90,000 miles
2002 C320 Wagon 122,000 miles
2016 AMG GTS 12,000 miles

You would think that, but i haven't had much luck at all in asking around. I even tried my old accounting professor but received no reply back, all in all it has been very discouraging. Thanks,
Ryan

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83 300SD.......sold
96 integra SE....sold
99 a4 quattro....sold
2001 IS300.......sold
2002 330i.........current.
2004 highlander limited....current.

RG,

I encourage you to seek the services of a professional tax-accountant. My accountant charges me $250 and saved me over $8,000 last year.

most likely that is what i will end up doing come the end of the year, but i want to make sure that i have everything set up properly now so that i don't screw myself come january. Are there major tax consequences if i do not set up a business checking account to run my income through?

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83 300SD.......sold
96 integra SE....sold
99 a4 quattro....sold
2001 IS300.......sold
2002 330i.........current.
2004 highlander limited....current.

I would agree with seeking professional tax advice as it varies from state to state on that front. Your colleagues haven't replied as that's a quiet way of avoiding helping since they are legally liable for giving tax advice.

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1974 240D 3.0L 4(M) - 250K -OM617.910 + 300D FW + Rajay turbo power!
1977 6.9 3(A) - 84k

You need to talk to an accountant right now. Will you have to forward income tax payments to the IRS/state/local taxing body on a quarterly basis this year? If you don't know the answer, that's just one reason to have the conversation. Much cheaper to pay the accountant than to be liable for some type of tax penalty.

This is in no way to be construed as tax advice, just common sense.
Until you do enlist a professional tax adviser, keep a detailed account of your miles driven, cel-phone bills, meals with clients or prospects that you pay for, and generally any other expenses that might be work-related. Also, if you are planning on taking a home-office deduction, the size of the home and the size of the dedicated office space along with the utilities for the home will be needed. I'm not saying this is all deductible, that's for your tax-pro to determine. But he/she needs the info once the determination is made. It does you no good to find out at the end of the year that (blank) is deductible and you haven't kept track of (blank). It also might be a good idea to use the same accountant your parents use. That can come in handy when making comparisons as far as dependency and tuition and student loan deductions.

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1983 M-B 240D-Gone too.
1976 M-B 300D-Departed.

"Good" is the worst enemy of "Great".

Yes i suppose you are correct on needing to talk to an accountant NOW. I have no idea about filing on a quarterly basis etc, nor even what that would entail. I'm becoming slightly dissapointed with my education because i really feel that i should know all of these answers by my senior year as an business administration/management major. I've taken both financial and managerial accounting, and neither one of them have touched on any of the questions i'm having. I can amortize out pretty much anything, figure out cost pools for basically anything, do uneven cash flows etc but i can't figure out how to do my own freaking taxes, good greif. Thanks for the help guys,
Ryan

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83 300SD.......sold
96 integra SE....sold
99 a4 quattro....sold
2001 IS300.......sold
2002 330i.........current.
2004 highlander limited....current.

Another quick question, would 20% be a safe amount to deduct from each of my checks to put into a savings account dedicated to taxes? Ideally in the future i'd like to find some sort of account that made enough interest where i could make money off of the money i am saving for taxes, but that will come later. Thanks,
Ryan

__________________
83 300SD.......sold
96 integra SE....sold
99 a4 quattro....sold
2001 IS300.......sold
2002 330i.........current.
2004 highlander limited....current.

You will need to file Sch C ( Sole Proprietor).
I suggest you ckeck out IRS Publications 334 (Tax guide for small businesses), 463 (Travel , entertainment and car expenses), 583 (Starting a business and record keeping) and 587( business use of your home)

http://www.irs.gov/publications/index.html

Once you get a handle on your estimated expenses, 20% of you estimated net income might not be enough DEPENDING ON YOUR ESTIMATED GROSS INCOME. I suggest 25%, not knowing your estimated gross income.
The 25% bracket for singles in 2007 begins at taxable income of 31,850. Add to this the 12+% of Self employment tax and you can get to signifcant rates at a relatively low income if you are single.

My guess is that your net will be probably 70 to 80% of your gross.

So, earnings x 75% x 25% ought to get you in the ball park.

If all you want is a safe estimate, take your 2006 total tax, pay half on June 15 and the balance in 2 equal installments 9/15 and 1/15/07. ( Of course you will owe much more come April 15, but you've had the use of your money.)

At least you have no state income tax to worry about in FL.


College tax courses don't teach much imo.

I'm running into the same problem. As soon as it looks like I will make some money I will talk to an accountant. I am keeping track of all my expenses because I think I can deduct a lot.

IMHO I am finding my college education to be lacking a bit when applied to practical matters.

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2016 Corvette Stingray 2LT
1969 280SE
2023 Ram 1500
2007 Tiara 3200

dynalow, i thank you for your detailed reply. I'm having a hard time understanding what you mean, however. When you say that the self employment tax is 12%, that means that i need to add 12% to what i would typically be taxed(I.E. around 20%, which would bring me to a 32% tax rate for an individual right out of school and trying to get his own business going?!?!) If thats the case uncle same can go F-himself, because thats BS. I'm certainly not saying you arent correct, that information just alarms me. If that is the case then what i have been doing, putting aside 20% of my gross, will not be near enough, unless of course i can find a way to make 12% interest off of my money. I highly doubt i will be in the bracket of the 31k plus a year, i'm estimating my income to be roughly 24k for the year, untaxed. Next year however when i'm done with school i darn well better be in the 31k plus tax bracket, or i will be looking for a new job. Once again thank you, i will take another look at this thread tomorow when i dont' have quite as many rum and cokes in me(had a date tonight, it went well...lol). Thanks again,
Ryan

__________________
83 300SD.......sold
96 integra SE....sold
99 a4 quattro....sold
2001 IS300.......sold
2002 330i.........current.
2004 highlander limited....current.

I worked as an independant contractor for over 5 years. Not a tax advisor, but in my opinion...

Your parent's maybe "claiming" you on their taxes as a dependant which is totally different than you working as an independant contractor. If they claim you on their taxes, you cannot take certain deductions on your tax return.

If you work for yourself basically, IE commission only, and you do not have a W2 with your employer, you are considered a 1099 income, or independant contrator. You do not have to have a business, or separate checking account, etc, although it is encouraged to keep track of all your ins and outs.

You usually have to pay estimated taxes every quarter, although the first year working I didn't have to, it was only after I had worked a year to where I had to decide on paying estimated taxes which is basically pre-paying income, and payroll taxes (taxes your employer usually pays like unemployment insurance, and Social security taxes) Now as an independant you have to pay it all. It sucks, and like they said earlier, it is like 15% in payroll taxes alone. Tack on the Fed Tax, and FL has no income tax....so... unless you have a s-load of deductions (mileage, home office, advertising, insurance, individually owned health insurance) Your Schedule C is going to be full of income, with no deductions. I would set aside at least 25% if you can if you don't expect a lot of deductions from your income. I filed my own taxes for 5 years as an independant.

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85 300CD Turbo "Das Polluter" 230K sold for $3,000

98 BMW 323is

1) Pay witholding taxes quarterly0IRS can and WILL fine you for not paying quarterly your first year as self employed.
2) You are also liable for SS taxes at DOUBLE the usual rate since YOU have to pay both your share AND the employers share.
3) YES ! Set up a biz checking account-DO NOT comingle the $$$ or IRS can and WILL consider ALL monies in the account to be biz $ not personal $. Consider Sub Chapter S Corp.
4) Try Turbo Tax for Small Business 2006. You can use it to estimate all quarterly taxes and print the paperwork for you. At least its set up for an individual to use and it will walk you through all the possible Schedule C deductions.
5) State Tax? Local Self Employed or Unincorporated Business Tax? etc, etc, etc? Go online toi State/Local Depot of Finance or Taxation to find out what your obligations are as self employed.
6) Due to nature of business you can also set up home office and deduct cost of rent/operation and also all computer related stuff, phone, ISP charges, clothing, dry cleaning of suits...save receipts, any blank receipts you can get, take 'em and use to level off at end of the year (you don't think the big boys don't do this? HA!) I used to have a "receipt party" and get 6 friends, pens of evry color/type, 10 different blank receipt books and we would justify $15K of non receipt expenses (tips and bribes to Skycaps, Doormen, Supers, etc for access, excess luggage, loading dock keys, basic stuff were listed as scaffolding rental, pizza delivery for the crew, cartage fees...).
7) Use credit cards for all deductable expenses and get a printout of all purchases at end of year.(IRS likes **** like this) same with all on line purchases.