Anyone ever worked as an independent contractor?

How do you handle your income tax withholding since none is withheld?

[osprey4]

You have to make estimated quarterly payments for both federal and FICA (inc. medicare). And if the estimated payments are low by more than 15%, I believe, you are subject to a penalty.

when do you start doing that?

[cyphen]

I think most people do it at the end of every third month, although i don't know if there are any set rules on it. I'll tell ya this, though - keep track of ALL your expenses - get all the writeoffs you're entitled to, because when you're self-employed you have to pay what's called "self-employment tax" which is basically the other half of your social security that your employer used to pay. And it sucks. So keep that in mind when you're charging. It's pretty substantial - i think it's 15%. Check it out on (i think it's schedule c) any profit you report on schedul c is subject to that tax. Just run some quick numbers between that and your 1040 to see what i mean. Write off everything you legally can, and as far as your car is concerned, you have 2 choices - mileage, or expenses. i reccommend using the "expenses" style, because there are a lot of bogus rules on the mileage one, like the first destination of the day doesn't count for deductible mileage, it's considered commuting.

Hope this helps.

[Tomteriffic]

What cyphen said. The payments are due the 15th of every 3rd month. The bookkeeping is a huge headache, the taxes are odious, and I'm glad my company went from an independent contractor to a stautory employee setup. I screwed up the tax thing one year so badly that, by the time the IRS figured it out, I owed 'em about $6,000 in penalties.

Well thanks guys. Guess I will just stay away from those kinds of headaches

[Knothead]

Ooh, I was gonna jump on this, but the question has already been addressed pretty darn well!

The only thing I can add is, get a professional tax guy. I tried to be cheap, (years ago) and do it myself...hey, what did I know about "Depreciation" or "amortization" or....?

Trust me, a good tax professional will more than pay for him/her self!

(and Cyphen is correct--it IS 15%,)

[cyphen]

Well, surreal, it can also be well worth it - as long as you go in informed, and know to charge appropriately so you aren't surprised at tax time.

For instance, you can write off part of your house payment for business use - and you can write off other things too. And sometimes the freedoms you get - such as "who cares what bankers hours are - i can go whenever i want!" and the like are well worth it. Also, it may help in the future depending on whatever you and your hubby have planned.

The downsides only come into play when you are uninformed, and a great source for getting informed is SCORE. They're retired business people who help out with business questions free o charge - it's a nonprofit thingamagoo.

Depending on what you're planning on for self employment, it can be very rewarding. The only real problem you have is making sure you have steady work. But then i know people who are self employed who make tons more than when they were employed, and actually have to turn business away.

The only other problem comes if you write too much off, it can be hard to document your income when applying for credit. But a lot of places are more lenient with this than they used to be.

So i would say keep it in consideration. It can be a whole new level of freedom.

Well, this one I'm not accepting is because they don't pay enough, but I'm not backing out of this entirely. Just this job offer. But I intend on doing this.
What this is is merchandising. There is a web site www.narms.com that has a job bank. There is tons of work there and I've gotten about 10 emails already in 3 days. It's not all independent work, most of it is you're hired by the company. But it is all part time work, you just assemble as many part time jobs as you want to get the hours you want to work. This would be great for someone going to school, or that needed part time additional work sporadically.

[osprey4]

It can't be too odious or there wouldn't be so many people doing it. I believe Quickbooks and some other programs can track expenses and do quarterly payment stuff. But it would be worth the price of admission to sit down with an accountant initially to get started.