Hello,
I have always been an W-2 employee until recently. I recently started a business, and contract work.
Here are some of my questions:
My wife and I have always filed a joint tax return. She is still a W-2 employee. What are the advantages and disadvantages of continuing to file jointly with her as a contract worker and business owner? Would we use the same form as before (1040?) if filing jointly? If I chose to file on my own, what form would I file with?
When hired for contract work, what are the advantages and disadvantages, tax-wise, of using my name and Social Security Number vs. using my business and EIN?
Here are a few other questions from the prewritten list that I'm still not sure about.
Much appreciated!
You'll need to sign in or create an account to connect with an expert.
Hi Goodenow, and thank you for your questions!
You asked:
1.Starting a business can significantly impact your taxes in several ways, here are a few:
2. Yes, if you expect to owe $1,000 or more in federal income tax for the year, you generally have to make equal quarterly estimated tax payments to the IRS.
Here are a few things to consider when determining how much to pay for quarterly estimated taxes:
3. Yes, you will also need to make quarterly estimated tax payments to the state of Washington if you expect to owe more than $1,000 when you file your state taxes. The deadlines and percentage thresholds are similar to federal estimated taxes. The payments go to the Washington State Department of Revenue. Check their website for more information. Washington State Department of Revenue
For more information on this topic, please check out the following links:
Estimated Taxes: How to Determine What to Pay and When
A Comprehensive Guide to Paying Quarterly Estimated Taxes
Common Questions About Paying Estimated Taxes
Please feel free to reach backout with any additional questions or concerns you might have!
Have an amazing rest of your day!
Terri Lynn, EA
*Please say "Thanks," by clicking the thumbs up icon at the bottom of the post.
**Select the post that answers your question by clicking on "Mark as Best Answer.”
Thank you for your help. Still looking for answers to the first portion of my questions.
My wife and I have always filed a joint tax return. She is still a W-2 employee. What are the advantages and disadvantages of continuing to file jointly with her as a contract worker and business owner? Would we use the same form as before (1040?) if filing jointly? If I chose to file on my own, what form would I file with?
When hired for contract work, what are the differences, or advantages and disadvantages, tax-wise, of using my name and Social Security Number vs. using my business and EIN?
Yes you still file a Joint return as normal. Joint still should be the best way. You will just add Schedule C for your business. Or what kind of business entity is it? Are you a Single Member LLC? If you are not a SMLLC filing as a S Corp it is a disregarded entity on Schedule C.
It doesn't matter on your tax return if you have an EIN. You give your EIN to people who pay you so you don’t need to give out your ssn. Thats if they need to give you a 1099NEC to report what they pay you.
My business is a single member LLC. I think I now understand what to do regarding attaching the Schedule C to the 1040.
Does it make a difference on the amount of taxes owed if I use my EIN or SSN? My question refers to any tax, federal or state. For example, if I do work under my EIN, don't I then owe state sales tax for the money earned? Whereas if I did the work under my SSN, I wouldn't owe that sales tax?
Hello again, Goodenow, and thank you for your follow up questions!
You asked "Does it make a difference on the amount of taxes owed if I use my EIN or SSN? My question refers to any tax, federal or state. For example, if I do work under my EIN, don't I then owe state sales tax for the money earned? Whereas if I did the work under my SSN, I wouldn't owe that sales tax?"
For federal taxes, both individuals and businesses can use their SSN as their taxpayer identification number(TIN), when filing tax returns. However, if you have an EIN because you have a registered business entity (such as a sole proprietorship, partnership, LLC, or corporation), you should use that EIN for tax purposes instead of your SSN.
For state taxes, the rules vary depending on the state. Some states require businesses to register for a sales tax permit and collect sales tax on goods or services sold, while others do not. In general, if you are selling goods or services in a state where you have a physical presence (such as an office or store), you are required to collect sales tax on those sales. Using an EIN or SSN does not affect this requirement.
Overall, using your EIN or SSN may not directly impact the amount of taxes owed, but it is important to use the correct TIN for your business entity and comply with all tax laws and regulations in your state.
More information about Sales Tax:
o determine how to charge and remit taxes for a small business, consider the following:
Small business owners must understand how and when to charge sales tax, as well as how to remit it to state or local government.
For additional information on related topics, please check out the links below:
Single Member Limited Liability Companies (SMLLC)
Small business tax workshops, meetings and seminars
Limited Liability Company Taxes
Hopefully this information helps! Please feel free to reach backout with any additional questions or concerns you might have!
Have an amazing rest of your day!
Terri Lynn, EA
*Please say "Thanks," by clicking the thumbs up icon at the bottom of the post.
**Select the post that answers your question by clicking on "Mark as Best Answer.”
Hello and good evening, Washingtonianite!
You asked,"What are the advantages and disadvantages of continuing to file jointly with her as a contract worker and business owner? Would we use the same form as before (1040?) if filing jointly? If I chose to file on my own, what form would I file with?"
What are the advantages of Married Filing Jointly?
Filing a joint tax return with your spouse offers many benefits.
What about Married Filing Separately?
In contrast, couples who file separately often have fewer tax benefits and may owe more in taxes. For instance, separate tax returns may result in more tax since Married Filing Separately taxpayers typically receive a lower standard deduction.
Even though there are many benefits to joint filing, there are some cases where filing separately may be more advantageous, such as in the following scenarios:
Medical expenses: If you or your spouse incurred significant out-of-pocket medical expenses, filing separately might help you surpass the IRS's threshold to deduct these costs. Since the threshold is based on a percentage of your Adjusted Gross Income (AGI), filing separately with only one income could lower your AGI.
Student loan payments: If your student loan repayment plan is based on your tax return's income, filing separately might help you manage your payments better.
Separated finances: In circumstances where couples prefer or need to keep their finances separate, such as during a divorce, filing separately can provide financial division. Additionally, filing separately can limit your liability for your spouse's tax matters.
If you are filing your taxes as a married couple, you have two options: Married Filing Jointly (MFJ) or Married Filing Separately (MFS). The forms you use would depend on which option you select.
If you choose Married Filing Separately, you can still use the same Form 1040 that you used as a married filing joint couple, but you would need to indicate that you’re filing separately from your spouse in the filing status section at the top of page 1 of the 1040. Additionally each of you will need tto prepare a 1040 for yourself and will be required to provide the name and social security number of your other spouse on tye married filing separate return.
For additional informatiuon please checj out these links:
Married Filing Jointly vs Separately: Which Should I Choose?
When Married Filing Separately Will Save You Taxes - TurboTax
How Should You and Your Spouse File Taxes? Married Filing Jointly vs Separately
Please feel free to reach backout with any additional questions or concerns you might have.
Have an amazing rest of your day!
Terri Lynn, EA
*Please say "Thanks," by clicking the thumbs up icon at the bottom of the post.
**Select the post that answers your question by clicking on "Mark as Best Answer.”
Congrats on starting your business and moving into contract work! Filing jointly with your wife as a W-2 employee is usually beneficial as it can lead to lower tax rates, but it depends on your specific financial situation. You’d still use the same 1040 form if you choose to file jointly. If you file separately, you’ll also use a 1040, but you may lose some benefits available to joint filers. It’s a good idea to consult with a tax professional to determine the best option for you.
As for contract work, using your business and EIN can help separate your personal and business taxes, offering better tax deductions and limiting your personal liability. On the other hand, using your SSN might simplify things if you’re just starting out, but could have fewer tax benefits.
Regarding your new business, you’ll need to pay self-employment taxes and make quarterly estimated tax payments to both the federal government and your state (although Washington doesn't have a personal income tax, there could be other obligations). Again, working with a tax advisor would be helpful to ensure you're compliant with all requirements.
By the way, if you're managing inventory in your business, you might find this guide on odoo scan barcode useful. It can help streamline your warehouse management, especially as your business grows.
Still have questions?
Make a postAsk questions and learn more about your taxes and finances.
julie-a
Returning Member
SarahMac7
Level 1
rsevrie
Returning Member
Spsmith10
New Member
mrm395
Level 1
Did the information on this page answer your question?
You have clicked a link to a site outside of the TurboTax Community. By clicking "Continue", you will leave the Community and be taken to that site instead.