Going from W2 to 1099

[jpm2953]

I'm changing jobs and new job is 1099. What are some tips and tricks for this? I've been W2 since I was 16 and I've never had to deal with this before.
I'll be making about 24k more a year with new job. I just plan on taking 30% of my check and putting it in a separate account for tax season??

 

[MegaFan]

I just plan on taking 30% of my check and putting it in a separate account for tax season??

As a 1099/Self-Employed person, you will need to pay the full FICA (15.3% on the first $142,800 of net income plus 2.9% on the net income in excess of $142,800). You will be paying almost 16% off the top, then add your Federal and State taxes. Will the other 14% of your budgeted 30% cover both Fed and State? You better find some creative ways to lower your net income (business deductions, Section 179 expenses/deductions, misc. write-offs). For the last 2 years, the 20% Qualified Business Income deduction has been a big help but who knows if that will continue in 2021 and beyond.

 

[jeep78]

Business deductions are key.

 

[Granite3]

Also check into making quarterly payments to your masters. IRS is fond of Penalties if you owe too much at the end of the year.....

 

[jeep78]

Also check into making quarterly payments to your masters. IRS is fond of Penalties if you owe too much at the end of the year.....

If you do it right, there will be very little to report.

 

[jpm2953]

I don't own the business. I'm working for someone else. What could I write off besides mileage and healthcare? My wife doesn't work if that matters

 

[The Old Jaybird]

SET UP A SEP-IRA AND FUND IT UNTIL IT HURTS. GO WITH FIDELITY OR VANGUARD, VERY EASY TO DO.

set up a new, "business" checking account, makes everything easier to keep straight.

 

[The Old Jaybird]

pm sent

 

[41mag]

Make quarterly payments (at least into a separate account) to help avoid the self employment tax from raping you all at once, also if you wait and pay it all when it comes due instead of qtr payments you will be penalized and also pay interest.
They suck when you get 1099 .
Make sure you get compensated enough to make it worth it. It only benefits the employer when they give you a 1099.
( MegaFan posted above....i saw after i posted this )

 

[jeep78]

"Make sure you get compensated enough to make it worth it. It only benefits the employer when they give you a 1099."

100% !