[th3jennp]

Hello,

I'm new to this forum and is in need of some advice and information.

The company I used to work for, has now hired me as a Independent Contractor. I've provided them with a W9 Form so they can pay be as a vendor.

However, I'm not sure if I need to pay Estimated Taxes each quarter to the IRS for this source of income.

Also, because I work from home for this job, will I be able to claim my internet bill and office supplies expenses?

Other Information I'm not sure is relevant or not:
I have another regular day job, that I filled out a W4 for.

Thank you in advance for your help.

[ScottGem]

First, if you expect to owe taxes at the end of the year, then you should pay estimated quarterly taxes. Basically the IRS doesn't like it if you owe too much at tax time. What too much is, you can get from your tax advisor or the IRS.

However, if you increase the withholding on your salaried job so that, when you file in April, you either get a refund or need to make a small payment, you can work it that way as well.

As for deducting expenses, you will want to file a Schedule C for the income paid as a contractor. You can then take deductions for office expenses, and other costs of providing the contract service. Legally, only expenses dedicated to providing that service are deductable but for practical purposes, you should be OK to deduct your Internet access fee (I do), office supplies, etc.

You can even take the home office deduction, but I would caution against it. I've found that the amount of the deduction is too small to offset the potential drawbacks. One of which is that your home would not be considered partially commercial property and that will complicate the sale.

[th3jennp]

Scott: Thank you for the response. I had a feeling I had to pay the estimate, but when I called HR Block, they told me I didn't have to because this is my first year doing this.

If I started working as a contractor in August and I have not paid the estimated tax yet, is it advisable to still pay it in January07? Or should I just wait for for the 1099 and pay it all?

Thank you again for your help.

[ScottGem]

Again, you need to figure out how much you will owe. Having started later in the year and figuring it into your total taxes, it may not be necessary. I just don't know what the thresholds on what is too much. The Block preparer may have been correct that you don't know yet how this will affect your total tax liability so you get a pass. But I would get something like Turbo Tax and do some What If scenarios.

[th3jennp]

Scott: Thanks again for the quick responses.
You've been very helpful. Much Appreciation!

[ScottGem]

BTW, the cost of Turbo Tax would also be tax deductible.

[th3jennp]

Scott: You are Awesome!
Thanks again!:D

[AtlantaTaxExpert]

Th3jennp:

If you are willing to share your income information (what you make on your regular job, what you anticiapte making as an independent contractor, your expenses, etc.), I can do a quick estimate for you using my tax software at no charge to you. You need only send me your data to [email protected] and identify yourself as Th3jennp in the e-mail.

I do this hoping you will use my tax service come tax time. If not, there is still no charge.

[Fr_Chuck]

And let us not forget you will also owe the 15 percent ( I think) social security tax , besides the regular income tax that you will owe. Normally as an employee you only pay 7.5 percent and the business pays the other 7.5 but as a independent contractor you will owe the entire amount

[AtlantaTaxExpert]

Oh, I did not forget it.

I just thought I would break the bad news via e-mail!

[th3jennp]

Thank you everyone for you answers and help.

[cbmb]

I would recommend passing on the home office deduction this year if your salaried job is providing you with an office. Tends to get a little "muddy". When you are 1099'ed and W-2'ed it becomes difficult to divide up expenses (sch C or sch A) for tax purposes. I know this, having been there the last few years. There is a positive side though - the salaried position automatically withholds taxes during the year and may be your "saving grace" if you're not one to stay on top of your "estimates". :D

[AtlantaTaxExpert]

Glad to help!

I suggest you heed CBMB's suggestion. His advice is solid!

[th3jennp]

Thanks again for the suggestions.

[AtlantaTaxExpert]

TO: CBMB

Oops! My apologies, madam!