Tax Law (Questions About Taxes)/Independent Contractor

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Question
I am a medical provider working as an independent contractor (1099) for various staffing agencies. It is to their benefit to hire independent contractors rather than employ medical professionals. Working as an independent contractor is foreign to me as I have always been an employee. Can you suggest an organized method as to how not to get in trouble with IRS? Should I form a company for tax benefits? If so what type and how? Can I do it myself or do I need a lawyer and CPA? I am great with patient care but clueless as to the business end of the system.

Thank you very much for your recommendations.

Answer
Patti,

Thanks for your question.

First, there is really no tax reason for form a separate company.  If you need liability protection, you could form an LLC.  This is a fairly simple organization to establish and you can still file it as a Schedule C on your 1040.  Forming a separate company just adds a level of complexity to your tax situation.

As an independent contractor you will file a Schedule C as a part of your 1040.  On this form you include all income related to the business, including income that is and is not evidenced by a 1099.  You will also be able to deduct any business-related expenses - mileage, office expenses, licenses and fees, supplies, medical equipment, etc.

The key to the above is good record-keeping.  Keep receipts, mileage logs, records of all income, etc.  This can be done by hand, with an Excel spreadsheet, or with a program such as Quicken or Quickbooks.  

You will also be subject to self-employment taxes, which is basically the employer and employee share of social security and Medicare.  This is based on your net profit from Schedule C and is calculated on Schedule SE.

Most likely you will need to make quarterly estimated payments of your taxes to avoid penalty and interest for not making timely payments.  These are paid on Form 1040-ES and are due the 15th of April, June, September, and January.

Hope this helps.  If you have additional questions, feel free to follow up.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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