To LLC or not to LLC

[kkite]

Hello!

So, this is the first year I have been a full-time 1099 employee only (freelance). in previous years I had a W-2 to help offset taxes as well as right off’s, but that is not the case this year. If I am going to move forward in future years as a full-time 1099 employee, is it beneficial to do my freelance work under an LLC? Are there other tax breaks or write off’s I can get by doing so? Just curious about the pros and cons

[xmasbaby0]

You are not an employee if you are getting a 1099NEC.  You are an independent contractor and you have a client (s).   You are considered to be self-employed, so you will pay self-employment tax for Social Security and Medicare, and ordinary income tax (depending on how much you earn).  

If you are a sole proprietor--which is what it sounds like, that is a disregarded entity when you prepare your tax return.   

If you have self-employment income for which you will pay self-employment tax for Social Security and Medicare,  you will need to use online Premium software or any version of the CD/download so that you can prepare a Schedule C for your business expenses.

https://ttlc.intuit.com/questions/2926899-how-does-my-side-job-affect-my-taxes

https://ttlc.intuit.com/turbotax-support/en-us/help-article/form-1099-nec/1099-nec/L5qTsBiSe_US_en_U...

https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...

https://ttlc.intuit.com/community/self-employed/help/what-is-the-self-employment-tax/00/25922

https://ttlc.intuit.com/questions/2902389-why-am-i-paying-self-employment-tax

https://ttlc.intuit.com/questions/1901340-where-do-i-enter-schedule-c

https://ttlc.intuit.com/questions/3398950-what-self-employed-expenses-can-i-deduct

https://blog.turbotax.intuit.com/self-employed/self-employed-tax-deductions-

calculator-2021-2022-50907/

https://ttlc.intuit.com/questions/1901110-do-i-need-to-make-estimated-tax-payments-to-the-irs

If you live in a state with a state income tax, you might need to make estimated payments to your state.

https://turbotax.intuit.com/tax-tools/calculators/self-employed/

https://ttlc.intuit.com/community/business-taxes/discussion/self-employed-don-t-miss-these-tax-moves...

[quorumof1]

Hi There:

The pro as the name indicates provides for limited liability in case of a civil lawsuit. The con would be the additional paperwork and fees to set up and maintain the LLC throughout the year. If you are in a business where there could be potential liability then LLC is the way to go. If not, the simplicity of not doing an LLC would be the way to go because of ease and less administrative costs. Tax breaks are about the same for an LLC and self employed person. 

Also if liability is at issue then please consult with an attorney for more information and analysis.