AboutNeil Johnson (The Tax DudeŽ) Expertise CPA to answer Federal income tax related questions for individuals, small business owners, estates and trusts. I also specialize in divorce related tax and financial planning matters.
I have extensive experience in nearly all areas of income taxation relating to businesses and individuals. I also regularly serve as a strategic consultant on a wide range of non-tax related business issues.
In addition, I provide aggressive, experienced and skilled representation against IRS challenges at the audit and appeals. I have successfully represented clients against the IRS on issues regarding reasonable compensation, valuation discounts, time value of money, travel and entertainment expenses, innocent spouse relief and personal liability for unpaid business taxes.
Experience Over 18 years in public accounting with an emphasis in taxes.
Education/Credentials B.A. (Accounting) Loyola University of Chicago
Over 300 hours of continuing professional education since June 2001.
Question I worked as an exotic dancer over the summer. I assume I would be considered an independent contractor since I was not paid by the establishment to work there. I actually had to pay them. I will not receive a 1099 however I thought it might be beneficial to file a Schedule C because I am HOH and have 2 children. My income was $8000. Am I on the right track or way off?
Answer Cory,
You are on the right track in thinking of yourself as an independent contractor. As an independent contractor you need to keep track of all income and expenses just like a self-employed business owner would.
All self-employed individuals and independent contractors report their business income and business expenses on Schedule C. Business income is all income received, not just what is reported on 1099s. When the IRS examines tax returns with a Schedule C, they will look beyond the 1099s to prove income.
Be sure to deduct the monies paid to the establishment where you danced. You will probably have other deductible items such as costumes, props, makeup and tanning sessions. It's important to capture all of your deductions for two reasons. You will lower your income tax and self-employment tax.
Income tax doesn't need much explanation, but you should be aware of what self-employment tax is. Self-employment tax is the mechanism in which self-employed individuals and independent contractors pay into Social Security and Medicare.
Regular employees have Social Security and Medicare taxes withheld from their paychecks. This withholding represents half of what is being remitted on their behalf. Their employers matches the other half. Self-employed individuals and independent contractors are both the employer and employee with regards to these payments.
Self-employment tax is calculated on Schedule SE based on the net income (income after expenses) from Schedule C. This tax has a rate of 15.3%, so planning for the additional tax liability is important not to overlook.
If you have any other questions, please feel free to e-mail me directly.
Regards,
Neil Johnson
The Tax DudeŽ
www.thetaxdude.com
taxdude@covad.net
