Author Topic: 1099 & Retirement - Help!  (Read 1942 times)


  • 5 O'Clock Shadow
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1099 & Retirement - Help!
« on: May 26, 2016, 05:35:15 AM »
I will be starting a 1099 job in a few weeks - first time as 1099. There will be a significant pay increase over the course of the year (it will slowly build up caseload) vs previous work (straight 40hrs). This past year I just got a handle on  taxes and retirement accounts for where I was at.

Now I'm reading about SEP IRAs individual 401k etc and I am totally confused about the relative benefits and why you would choose one over the other. 

This tax year half the year will be as W-2 (jan-may) and after that 1099 only. Next year will be 1099 only the whole year and into the foreseeable future. I want to get set up with something that works for the next few years. I have already contributed several thousand to the current job's 403b.
I'm not sure how current contributions may or may not conflict with a new self employed retirement acct. And I do not know which one to choose. I'm having a hard time understanding the subtle differences for setting it up, possible early withdrawals, taxes, etc.

Any advice? Thoughts? Considerations?


  • Pencil Stache
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Re: 1099 & Retirement - Help!
« Reply #1 on: May 26, 2016, 07:05:37 AM »
I've been where you are and all I can say is I'm really glad I had a good accountant. He talked me through my options, helped me set things up, and didn't charge anything for it since I use him for my taxes (they get really messy with the multiple states I do business in now) and a few other things.

Ok, so not that helpful, but if you have an adviser you trust, I'd probably talk with them. Things can differ state to state a bit and certainly case by case.


  • Handlebar Stache
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Re: 1099 & Retirement - Help!
« Reply #2 on: May 26, 2016, 07:15:10 AM »

Both SEP and self employed 401k allow up to $53K in contributions, but the 401k allows the max at a lower income level ("potentially higher contribution limits than SEP IRA").

Both are easy to set up. I've had both. I prefer the 401k.


  • 5 O'Clock Shadow
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Re: 1099 & Retirement - Help!
« Reply #3 on: May 27, 2016, 05:07:35 AM »
I don't have a CPA or adviser or like...I've never made all that much money before and always as a regular employee (so stuck with their choices).

AdrianC - thanks for the chart link. That looks very helpful. I hadn't come across it so far.

I'm very excited about this new job but nervous about making the best choices about all these things. I'm a bit nerdy excited to learn new tax, deductions, and investing stuff ! haha.


  • Stubble
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Re: 1099 & Retirement - Help!
« Reply #4 on: May 28, 2016, 08:00:48 AM »
I've always been self-employed and it is very confusing at first. Here is a nice overview which probably sums up much of what you have been looking at:

I would recommend a stutter-step approach where you hire an accountant for a few years, ask a lot of questions and really pay attention to where certain items go on your tax returns. One thing that a good accountant can really assist you with from the get go is to help you figure out what your legitimate business deductions are. There are generally LOTS of them and the advantage of knowing what they are multiplies over time (because it just becomes automatic that certain expenses are deductions).

Another trick with being self-employed is that, depending on your situation of course, you can sometimes elect to either accelerate deductible expenses or delay them. You can sometimes do likewise with income when you are on the cusp of a new tax year. Both of the above have the effect of moving money into a less good year and therefore giving you more favorable tax treatment. For me it has almost always been advantageous to accelerate expenses (make business purchases before the end of the year), and delay income (opting to be paid in January for work done in December). In combination those two things essentially mean that you are always putting off pay taxes on some of your money for another year, which just keeps more of your money in your pocket over time.

Once you get a handle on all this you can nix the accountant if he/she is not adding any value. A good one will not make the exact same recommendations on retirement accounts every year.