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Another money question...


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Well I was on contract (W2) and had my contract canceled early.

Anyways, I'm looking at doing some 1099 contract work...does anyone have any words of wisdom about it?

Basically there are no deductions (taxes, retirement, etc). So would it be okay to just estimate my taxes and put it in the bank?

Anything else I need to watch out for?


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I used to do alot of 1099 work... You have to be carefull. You can be fined by the IRS if you are on 1099 and dont pay/file income taxes quarterly. But there are alot of nice deductions you can take on taxes.

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Keep all of your receipts for anything you spend to provide your services (ie: job training, specific supplies, insurance, license fees, mileage if you work at multiple sites, etc) You will need to file a schedule C - Profit or Loss form Business. Download one from irs.gov and look it over. You will also be subject to self-employment tax (Same as FICA for W-2 people). Basically you have to pay both sides of FICA whereas a W-2 employee pays one side and the employer pays the other. You get a credit for the employer side on page one of the 1040.

You also should pay quarterly estimateds. You have to pay in 100% of last year's tax liability or 90% of this year's liability in order to avoid unerpayment penalties.

I am out of free advice for now. If you'd like to discuss further shoot me an email or call.

David S. Schaefer , CPA

Cave Creek AZ 85331



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Thanks for the tips guys.

David, no problem, I understand.

If I end up going this route I'll give ya a ring.

I'm probably about 2 weeks from possibly doing it.


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