next »

[jwormold]

I'm in the same boat. Reading all these posts, I'm more befuddled than ever. I really, really shouldn't even try to do my own taxes.

[zharkov]

I'm in the same boat. Reading all these posts, I'm more befuddled than ever. I really, really shouldn't even try to do my own taxes.

Taxes are a bit confusing, hence we have accountants and tax prep firms like Block.

I've had good luck with TaxCut and TurboTax, you basically answer questions and it calculates your taxes.  FWIW, I'd guess that these programs would want to automatically add SE tax to those 1099 earnings, but don't know for a fact.

[bayoucitybeancounter]

Are you a graduate student receiving regular paychecks from the same university where you did the editing?  In other words, are you receiving BOTH a W-2 and a 1099 from the same payor, or is the 1099 from the professor him/herself rather than the university?

I ask because many universities will not issue a 1099 to a current employee.  If that is your situation, you may wish to contact your payroll office to find out your institution's policy.

[jboolo]

I realized after reading several of these responses that I should probably clarify a few points.

1. I had no intention of shirking my tax responsibilities as I think some may have inferred. I know that I have to pay taxes regardless of the income source, but I have never received a 1099-MISC and was unclear of how to deal with it. (I have received 1099's for other purposes such as interest, dividends, etc.)

2. I am a graduate student who received a W-2 from the university for work done as well, but the 1099-MISC was issued by an individual faculty member. The funds were NOT passed through the university.

3. I find the argument that I was an independent contractor to be a little shady in that I was required to report to specific locations at specific times to complete most of the work done. There were some hours I was allowed to arrange myself (the times I was able to work from home), but I received specific supervision and direction for the majority of the time. The project was quite micromanaged.

4. I have filed my own taxes since I began working at the age of 14. I have dealt with filing taxes in 3 states simultaneously and other issues that are a little more complex than basic tax filings. Given the reduction in preparation time provided by using tax software, I have recently begun using it (during the last few years).

5. In using the tax software, self employment taxes were automatically calculated for me. Given that the university does not collect FICA from my assistantship pay, I had assumed that I would not have to pay FICA on the income earned for the editing work.

6. While many here seem to think that the risk of audit is small, I still want to file my taxes correctly. An audit would simply be one more stress that I do not need while finishing my dissertation.

7. While I know that to many of you the additional tax burden (the self employment tax) is somewhat small and insignificant, I am a graduate student and given the situation for 2007 in particular, it is quite a bit of money with respect to the rest of my refund.

I really appreciate all of the helpful suggestions provided here. While I have not yet, I will check out the publications some of you have referenced this weekend (when I'll be looking at my taxes again). From what some of you say, it seems that I'm back to filing without the software for starters to avoid the self employment tax that many of you seem to think is not required. Please let me know if any of the other information provided generates other suggestions.

Thanks again.

[voxprincipalis]

3. I find the argument that I was an independent contractor to be a little shady in that I was required to report to specific locations at specific times to complete most of the work done. There were some hours I was allowed to arrange myself (the times I was able to work from home), but I received specific supervision and direction for the majority of the time. The project was quite micromanaged.

When I play a wedding gig, I have to report to a specific location at a specific time to do the work. But I am not an employee of the bride and groom, nor of the church or reception hall.

"Independent" does not mean "work when you like", nor does it mean "work without supervision."

VP

[jboolo]

Based on what I just read from one of the publications to which I was referenced earlier (http://www.irs.gov/businesses/small/article/0,,id=98846,00.html), it appears that I am NOT and independent contractor.

Here is part of what that document contains:
"The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to SE tax. You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed."

It also appears that I am NOT and independent contractor based on additional information found in Publication 15-A ( http://www.irs.gov/publications/p15a/ar02.html#d0e602) and that I am considered a common-law employee. This is because of the degree of control that the professor had over me and the work I did. These types of control, as listed in this publication, that pertain to my specific case are
1. behavioral control
2. instructions given to the worker, in particular whether or not the employer has retained the right to control the details of the worker's performance
3. financial control such as the extent to which the individual's services are available to the relevant market via advertising and maintaining a visible business location
4. extent to which the worker can realize a profit or loss (independent contractors can realize both.....common-law employees can only realize profit)

Is this how others interpret this as well?

[jboolo]

I forgot to include this in my previous post. This is also a distinction between an employee and an independent contractor:

"How the business pays the worker.   An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. An independent contractor is usually paid by a flat fee for the job. However, it is common in some professions, such as law, to pay independent contractors hourly."

[dr_strangelove]

I'm not a lawyer or an accountant, but my wife worked as a (sometimes freelance, sometimes employee) graphic designer for many years, and what you describe sounds like contract work to me, and that a 1099 is the right form.

[bayoucitybeancounter]

There's a helpful discussion at
http://www.irs.gov/faqs/faq-kw54.html

You really only have two choices. 
1) Accept that you were an independent contractor, file the 1099 income on Form 1040, Schedule C and fill out Schedule SE.
2) Reject the notion that you were an independent contractor and file Form SS-8, which asks the IRS to determine whether or not you were an employee.

If the IRS decides you were an employee, your employer will be notified and will pay the employer's share of taxes.  This can anger the employer.

On the subject of FICA, the exemption for students only applies to employment with the university in which he or she is enrolled.

[aristotelian]

Sorry, you were an independent contractor.  Unless the prof was looking over your shoulder the entire time, what you describe sounds like freelance editing.  You were still in control of how the job got done, otherwise the prof would have edited it herself. 

Even if you could make some kind of argument that you were an employee, do you really think it is worth your while to make the prof (who presumably did you a favor by offering you the job) register with the IRS and go through the trouble of withholding taxes?  If you push this, you can be sure that you won't get any future work from this person or anyone she knows.

 

[zharkov]

Sorry, you were an independent contractor.  Unless the prof was looking over your shoulder the entire time, what you describe sounds like freelance editing.  You were still in control of how the job got done, otherwise the prof would have edited it herself. 

Even if you could make some kind of argument that you were an employee, do you really think it is worth your while to make the prof (who presumably did you a favor by offering you the job) register with the IRS and go through the trouble of withholding taxes?  If you push this, you can be sure that you won't get any future work from this person or anyone she knows.

 

I agree to accept that you were a "consultant" and include the 1099, with the expectation that you'll pay the SE tax.  This is a gray area, but in general, if you are a freelancer or were hired for a limited period of time to complete a specific project, then you're a consultant.  Freelance writers and editors are often hired as "consultants" and receive 1099s for their tax records.  And thus often need to pay SE taxes.

[drdata]

I've been filing 1099 income off and on for years. If you haven't done so, get with a financial institution (bank, brokerage, on-line) ans set up a SEP IRA (Self-employed IRA).  You can still do this for last year's income.  Deposit the max percentage of your earnings.  This reduces the SE tax liability.  Also, in the future, you can always roll over the SEP IRA into another retirement account. Second, if you bought any piece of computer equipment that you used for the work, you can accelerate the depreciation on it and that will reduce your liability. Same with any piece of furniture. I would not recommend bothering with the home office deduction.  It is complicated, tedious and ultimately gives you next to nothing unless you turn 90% of your living space into a factory.