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Combining above the line deductions+standard deductions on a 1099 Tax form?

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Combining above the line deductions+standard deductions on a 1099 Tax form?

Postby kedrick91 » Thu Dec 15, 2011 6:09 am

Pardon my lack of knowledge. I will be receiving a 1099 form and filing as an Independent contractor for a tech company to my dismay. Can I deduct my health care costs above the line and take a standard deduction below the line as well?

Also what is the best resource for me to figure out how to estimate and pay my taxes quarterly to the Federal Government, and to the State of California? I think I have got the IRS schedule down reasonably, but I am confused as to how often to pay for the State of CA, and the rules the 1099 contractor.

Your help would be appreciated.

Thanks!
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Combining above the line deductions+standard deductions on a 1099 Tax form?

Postby johnston » Thu Dec 15, 2011 6:17 am

The state of CA requires to pay estimate tax payments on the same date the federal tax payments are made. The rates are lower. Form 540 ES and instructions are needed for your information. They are available at ftb.ca.gov
If you have schedule C ready the net profit is subject to federal tax and self employment tax aka social security and both items are paid together to the federal government four times a year ( form 1040ES)
The state of CA will tax the same profit ( income tax only) and quarterly payments are due as stated above.
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Combining above the line deductions+standard deductions on a 1099 Tax form?

Postby victorian » Thu Dec 15, 2011 6:18 am

I'm attaching links for you that might help, but here's my quick answer. Independent contractor for a tech company--sounds like IT work. You guys don't tend to have a lot of write-offs to offset your income. (I do a lot of IT contractor returns.)

I'm sorry, this is going to hurt--expect that you're going to pay about 40% of your income in taxes. I know, ouch. You'll have self employment taxes of 13.3% (it's usually 15.3% but this it is a little lower.) Then, I'm figuring generally an IT person is in the 25% tax bracket (some are higher). California income taxes max out at 9.3%.

Now that I've sent you into shock--sorry, remember that you've got time to 1. figure out what deductions you can take, 2. work on strategies for lowing your taxes, and 3. plan ahead for paying the taxes. You're smart to ask now instead of waiting until it's too late.

Check out the links, they'll be helpful. I'd recommend that you hire a professional to help you claim every legal deduction that you're entitled to. The first year as contract labor is usually the most difficult tax wise. It will be much easier to stay on top of things in the future.
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Combining above the line deductions+standard deductions on a 1099 Tax form?

Postby ryuu » Thu Dec 15, 2011 6:28 am

You need to look at IRS form SS-8 and see if you really are a contractor.

If you are, how are you paying for your insurance? If it's through Cobra on a previous job, you can't deduct above the line.

To estimate, you draw up a dummy tax return and calculate what you would owe, then make the estimated payments. To micro manage, see IRS form 2210.
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Combining above the line deductions+standard deductions on a 1099 Tax form?

Postby spelding » Thu Dec 15, 2011 6:34 am

no the standard deduction and personal exemption are not claimed on the Sch C, you report your income(1099) and business expenses to determine your 'net' amount
once you have determined you gross income from all sources(including the sch C) you are allowed to use your health insurance as a credit to reduce you gross, then you apply your personal exemptions and standard deduction
on Calif. your only concern is your actual income tax, there is no self employment tax on your self employment income
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