1099 and LLC

Forum|Forum|3 years ago
June 28, 2023
4 replies
62 views

I’m currently being paid through the form of 1099s, should I get a personal CBA/Accountant to handle my finances? Also, what would be the pros and cons of opening up an LLC and being paid as an Independent Contractor?

Ask the Experts - Energy - June 2023

johnd84

Level 5

Hi @Shall175 Great question!

If you're being paid via 1099s you are already being paid as in independent contractor. What is self employment tax? Basically you will end up likely filing a Schedule C for self employed income, and you'll owe self employment tax on this income. Self employment tax just takes the place of the payroll taxes you would pay if you were a W2 employee.

As far as forming an LLC, that's a question best directed to an attorney in your state familiar with business formation. If you are the sole owner of the LLC you will still file on Schedule C and there's not difference to your tax return, but there could be a significant difference on the legal side of things.

As a 1099 contractor you are also able to deduct expenses related to your business, so you will want to track those. Here is a link to guide you: Self employed expenses.

I hope this helps!

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conniem123

Alumni - Intuit

Hi Shall175,

As an independent contractor you would not need an accountant if you are comfortable keeping track of your business income and expenses. Depending on the type of your business and the volume of the income and expenses, you may choose to have an accountant. You can use an accounting system, an excel spreadsheet, or any method you choose to keep track of the income and expenses.

As a single member LLC, the IRS still considers that being self employed, and filing the Schedule C along with your individual tax return. A single member LLC may not pay oneself. A single member LLC, or independent contractor, pays tax each year on their profit or loss from the business. Wages or contract labor to yourself are not allowed.

I hope you find this information helpful!

Connie

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Shall175Author

Level 2

Ok, I’m being paid a ‘salary’ as a Property Manager so I receive the same amount each week. Will it be worth creating a LLC since I know what I’ll bring in on a yearly basis? I’m mainly looking at this in terms of my ability to write off my daily/weekly expenses.

conniem123

Alumni - Intuit

Regardless if you operate under your name and SSN, or an LLC with either your SSN or an EIN, you are able to deduct your business expenses to lower your income when deriving the business profit or loss.

Your business expenses will be reported on Schedule C, regardless if you are an LLC or stay as individual.

https://ttlc.intuit.com/turbotax-support/en-us/help-article/self-employment-taxes/self-employed-expenses-deduct/L37ZS1B8T_US_en_US

I hope you find this information helpful!

Connie

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