freelance work and the law

Curvkyle,

I'm going to try to answer this as best I can. Amount taxed varies from state to state, income to income, marital status to single status, and the list continues. There are a few shelters some people are able to capitalize on, such as making a minimal amount from the freelance that allows you to be untaxed, but it ultimately boils down to each individual situation.

For example, let's say you earn 3x as much than your regular job pays you, are single, live in an apartment, have no children, don't give to charities or any sort, and have relatively "impulse" shopping habits. You will be a christmas gift to the IRS. In California, someone in that position would be taxed up to 40% I believe?

Now, that situation could easily change.. it depends on yours. Take into account who you earn more with.. also take into account that as a freelancer, which in some states I believed is taxed as a "sole propietorship," you need to earn a significant amount before any significant taxes are called for...

Unless you are a single high roller, you should be fine. That's the best I can do, sorry

thanks alot

Most my money is made through the company i work for though. I do this because I have been told it will cost less come tax time. Do you know where I might find more information on this? maybe a forum or somewhere?

thanks again

CurvKyle wrote:
Most my money is made through the company i work for though. I do this because I have been told it will cost less come tax time.

Does the company you work for also sell London bridges?

You said the company you worked for was not withholding any taxes and that you were also free lancing. That tells me that either you:

Your company (not withholding any tax) does not consider you to be an employee but rather a free-lancer or what the IRS calls an "Independent Contractor".

An independent contractor is required to file a Federal 1040 tax return if you have more than $400 gross income for the year.

An independent contractor has to pay self-employment tax of 15.3% (form 1040SE) on your net profit (business income) reported on 1040 Schedule "C". This business income is added to any other income and you then get any personal type deductions and exemptions to determine taxable income.

Therefore your tax on taxable income varies from 10% to 35% plus the 15.3 self-employment tax (payroll tax). Aren't you glad you have a partner like the IRS?

Suggest you read the IRS publication 17, "Your Federal Income Tax", 323 pages. Click here http://www.irs.gov/pub/irs-pdf/p17.pdf

well I could just as easily be a freelancer instead of working for the company. But i thought the taxes would be higher so I let my pay checks go through the company.

I was wondering something though. When I do freelance work the clients send checks directly to me in my name. I am more then positive they are using this as a tax write off. I guess what I am wondering is how does the IRS keep track of this money...how do they know I owe taxes on it when I never gave the guy my SS# or any kind of ID besides my mailing address.

Sorry if I sound ignorant.

EDIT: OldJack...if there is anyway I could chat with you on AIM or MSN please let me know. My sn is curvsalesrep on aim and [email]pentagon@curv.net[/email] on msn. I would greatly appreciate it.

You say you got a "paycheck". Did the company withhold "social security taxes" ? If they did then they treated you as an employee and the 15.3 % self-employment tax does not apply to the income earned at the company. If the company did not withhold social security taxes, then they are treating you as a freelancer or as the IRS calls it an Independent Contractor. However, the other freelance income is subject to the 15.3% if it is more than $400.

Both income sources is subject to "income taxes" regardless of who paid you. Anyone that pays you are taking the expense as a write-off. That is their business expense. The "guy" is required to get your SS# if the amount he pays you will exceed $600 for the year. If he does not get your SS# and report the payments to you and the IRS he will loose the deduction on audit and be fined $50 per person up to $100,000 fine.

Here is a reference that requires you to give your SS#:

2004 IRS Publication 17, ?Your Federal Income Tax?, page 24:

>>Failure to supply social security number. If
you do not include your SSN or the SSN of
another person where required on a return,
statement, or other document, you will be sub-
ject to a penalty of $50 for each failure. You will
also be subject to a penalty of $50 if you do not
give your SSN to another person when it is
required on a return, statement, or other document.
For example, if you have a bank account that
earns interest, you must give your SSN to the
bank. The number must be shown on the Form
1099?INT or other statement the bank sends
you. If you do not give the bank your SSN, you
will be subject to the $50 penalty. (You also may
be subject to ?backup? withholding of income
tax. See chapter 5.)
You will not have to pay the penalty if you are
able to show that the failure was due to reasona-
ble cause and not willful neglect. <<

http://www.irs.gov/pub/irs-pdf/p17.pdf

Sorry but I only answer questions here on the forum.

OldJack,

The company I work for doesn't take out a dime. It's a very small company and we are pretty good friends.

The client I did freelance work for did not ask for my SS#, so maybe he isn't using it as a tax write off. Does that still mean I have to pay the 15.3% on the money I earned from him?

Thanks for the help

The company and the guy are required to report, to you and the IRS, all payments if they total $600 or more for the year. It makes no difference if they "write-off" or not. If they do not report it on form 1099MISC and form 1096 they could be fined $50 and could be held responsible for and pay the 15.3% in addition to you paying the 15.3%.

You are required to report your total income regardless of the amount and wheather they reported it or not. If you under report your income by 25% or more it is tax fraud and you could get lucky and share a cell with Martha Stewart.

As they did not withhold the 15.3% social security taxes, then you have to pay it with form 1040SE attached to your 1040 tax return. no exception. The government has to have the 15.3% so they can give me my retirement check. Oh..no, yes this is where the government gets the money for social security and medicare for you to live in your old age. 🙂

Re: freelance work and the law

My question involves unemployment benefits for the state of: New York

I was laid off in November. While receiving severance, I was working on a book I was commissioned to write by an outside company. I stopped working on the book before I started receiving unemployment. However, while having been receiving taxi to toronto pearson airport unemployment for several weeks now, at a rate of $405 per week, I received a $900 check for the book. Do I claim this? How? Every week I claim unemployment by answering a set of questions online. None of them seem to cover this type of predicament.

Also, I am starting to freelance and earn a few bucks here and there. I have no idea how to report the moneyAirsoft Guns I earn to unemployment. The questions asked don't cover specific figures, etc. I am so confused. Any help?

I can't seem to figure out how to actually speak to a real human being at the NY unemployment office.