In the past, I have tried the private contractor thing, as a side job. My earnings (I believe were less than 2,000) ended up being trivial after paying both halves of Social Security, as well as the normal taxes. From that point on, I refused to work for anyone who would not put me on the pay roll. Now, I find myself at a crossroad. I was offered a job but was told I would not be put on payroll. The workflow is inconsistent and I'm concerned that I will find my self in the same situation if I continue working for this individual. From what I can tell, if I earn over $400, then I must report it. I do not anticipate making a significant income from this job, so I am thinking this isn't worthy my time. Can anyone clarify what I will likely be expected to pay when it's time to file? Do deductions take the place of paying into social security, or will I be responsible to pay that, even if I max out on deduction? The biggest problem is that I don't know what, exactly, to expect and what dollar amount I need to make to actually be worth it for me to cover the tax issues. I live in California, in case that makes a difference.
Hi Kimberly, Reporting amount varies from state to state (usually around $400-$600). Even so, if you get audited and they see the payment you'll be expected to pay taxes. Late fees and penalties might double your tax bill. It's a good idea to report all income. $400 isn't worth messing around with - especially if you'll be making more than that from all of your income streams for the year. The I.R.S. isn't known for being polite or reasonable. If you end up dealing with them, you'll probably regret it. These guys have a serious chip on their shoulder. All income is taxable income in their eyes. Never mind the technicalities of the law. ~Newbie Shield~
