Author Topic: Freelancer Self Employment Taxes  (Read 1638 times)

Cowspot28

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Freelancer Self Employment Taxes
« on: December 07, 2016, 08:54:14 PM »
Hello,

I am a regular W2 employee thinking about doing some freelancing (medical writing). What are the tax ramifications for doing so? It looks like I would be a sole proprietor. Do I need to pay only self employment taxes (15.3% FICA) + federal/state taxes (as I already do)? Is there a minimum amount earned from the proprietorship vs my regular job where I would not be taxed at all? Since it is already Dec, I don't expect to earn much this year (<$1000), but I'd also like to know for future years. I have no expenses associated with the freelancing.

Thanks for your help!

trollwithamustache

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Re: Freelancer Self Employment Taxes
« Reply #1 on: December 08, 2016, 08:56:56 AM »
You probably want to be a sole proprietor.  First, as a small business you can generally choose cash basis accounting, so that means if you do any work this year, you can simply not deposit the check until next year and have the income count towards next year. This may or may not be the most optimal thing to do, but it gives you time to sort everything out.

Check out the Nolo Press books on self employment, they were a huge help to me when I started.  Any net profit (Revenue minus expenses) will basically be added to your income and you have to pay taxes on it.  There is likely a bunch of stuff you can deduct from the business Internet and cell phone costs associated with the business easily, any computer equipment purchased for the work? office supplies purchased for the work? It may also open up some additional retirement account options such as a SEP IRA.  Self Employment with good record keeping can result in shielding a very nice chunk of that revenue from becoming income.


CareCPA

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Re: Freelancer Self Employment Taxes
« Reply #2 on: December 08, 2016, 09:05:49 AM »
We went through the debate in this thread about whether or not receipt of the check constitutes income. I would advise reading through it before simply "not cashing" a check you have received in hopes of deferring income: http://forum.mrmoneymustache.com/taxes/want-to-apply-check-as-2017-income/

To answer your question: yes, self employment tax plus normal income taxes. There is no minimum for not reporting, although you probably won't get a 1099 until you hit $600 from a company.
As mentioned, consider methods of deferring such as a Solo 401k or Simple IRA depending on your structure.

SeattleCPA

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Re: Freelancer Self Employment Taxes
« Reply #3 on: December 08, 2016, 10:45:24 AM »
You probably want to be a sole proprietor.  First, as a small business you can generally choose cash basis accounting, so that means if you do any work this year, you can simply not deposit the check until next year and have the income count towards next year. This may or may not be the most optimal thing to do, but it gives you time to sort everything out.

The above doesn't work. If you receive a check, it's irrelevant whether you deposit it or not. You have constructive receipt.

The way to get this to work is to actually not receive the check until next year.