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Alexmcg · Aug 2, 2011, 08:37 PM

Hey,

I'm a freelance designer but not registered as a business so I have no write offs. My employer doesn't take out any taxes no philly wage, state or federal. What % of my pay should I be putting aside for taxes and who do I pay taxes to.

Thanks,
Alex

joypulv · Aug 2, 2011, 08:46 PM

You don't have to be a licensed business to take tax deductions, if that's what you mean.
You just file a 1040, Sch SE, and Sch C and end of year.
SE is a straight 15.3% and covers SS and Medicare.
Sch C is where you list business expenses, from car or mileage to pens and paper.
Print them from IRS.gov to figure your own estimate in advance.
The first year you don't have to file quarterly estimated tax, but next year you will.
You pay state tax in the state you work in. You also file state tax in your state of residence and take the credit for any other state.

AtlantaTaxExpert · Aug 3, 2011, 06:36 AM

Actually, this year the SE tax is a bit smaller this year, at 11.3%, due to a one-year reduction passed by Congress.

Alexmcg · Aug 3, 2011, 07:46 AM

Okay I understand that now but how do I pay the Philadelphia Wage tax.

AtlantaTaxExpert · Aug 3, 2011, 10:11 AM

You can pay the Philadelphia wage tax at the end of the year by filing the local tax return.

joypulv · Aug 3, 2011, 11:01 AM

Atlanta, is the wage tax on 1099s, which aren't wages? It looks like just W2s.

AtlantaTaxExpert · Aug 3, 2011, 01:07 PM

I do not do Philadelphia tax returns very often, so I am not sure.

Most local (city and/or county) tax returns also tax 1099 income and business income.

ebaines · Aug 3, 2011, 01:11 PM

The Philly wage tax applies applies to "salaries, wages, commissions and other compensation earned ... for work done or services performed or rendered in Philadelphia" and on the "net profits ... of businesses, professions, or other activities conducted in Philadelphia." This is from: http://www.phila.gov/revenue/pdfs/Re...egs_020102.pdf

My take on this is that a freelance designer who is self-employed and paid by 1099 is obligated to pay tax as determined by the amount of his net profit made while working in Philly.

AtlantaTaxExpert · Aug 3, 2011, 01:20 PM

ebaines:

Thanks for the clarification.

joypulv · Aug 3, 2011, 03:52 PM

Work from home most of the time!

Alexmcg · Aug 9, 2011, 08:40 AM

If I am working from home in NJ, but my pay comes from a company in Philadelphia, do I still have to pay PA state tax/Philly wage taxes?

AtlantaTaxExpert · Aug 9, 2011, 09:06 AM

Okay, if you are NEVER in either Philadelphia or Pennsylvania, then you are NOT LIABLE for either the Philadelphia Wage Tax nor the Pennsylvania state income tax.

It was decided in tax courts decades ago that the worker's physical location is the driving factor to determine which state/county/city can tax the worker's pay.

For this reason, since you work and live in New Jersey, only New Jersey has the legal standing to tax your income.

Alexmcg · Aug 9, 2011, 09:16 AM

Thanks! All my questions have been answered, sorry for any inconvenience. I just don't want to get slammed with backed taxes 5 years down the road.