Self-employed and 1099 contractors
Tax planning for the self-employed and 1099 contractors
When nobody withholds tax from your pay, the year needs a plan: what to send the IRS each quarter, which costs to track, and when a different structure starts to pay. We keep that plan current all year.
We work remotely with freelancers, consultants and independent contractors in every state, from people with one side business next to a W-2 job to full-time owners with employees of their own. Every return is prepared or reviewed by an Enrolled Agent, enrolled to practice before the IRS.
Who this is for
- Freelancers and consultants paid on a 1099 or through payment platforms
- Independent contractors in tech, health care, design, trades and professional services
- People with a W-2 job and a growing side business
- Anyone who has fallen behind on books or returns and wants to catch up
What we handle
- Quarterly estimates. Federal and state payments projected from this year’s income, recalculated every quarter.
- Self-employment tax. Social Security and Medicare on your profit, planned for rather than discovered in April.
- Deductions. Home office, vehicle, equipment, software, travel, health insurance and the rest, with the records that support them.
- Retirement. A SEP IRA or solo 401(k), chosen and sized for your income and opened in time.
- Structure. Whether an LLC, an S corporation election or neither is right for you this year.
- Bookkeeping. Monthly books, so the projection runs on real numbers, plus 1099s for any contractors you pay.
The mistakes we see most
- No estimated payments in the first year. It feels fine until April brings the full year’s tax and a penalty at once.
- Business and personal money in one account. It makes deductions hard to prove and books hard to keep.
- An LLC formed to save tax. On its own, a single-member LLC is taxed exactly like a sole proprietorship.
- Retirement left to the last minute. Some plans must be set up before the year ends to get the full contribution.
Common questions
Do I have to make quarterly estimated tax payments?
Generally yes, if you expect to owe $1,000 or more when you file after withholding and credits. Federal estimates are due April 15, June 15, September 15 and January 15, and most states with an income tax have their own. When a date falls on a weekend or holiday it moves to the next business day.
How much should I set aside for taxes as a 1099 contractor?
It depends on your income, your state and your deductions, so we project the year each quarter instead of using a flat percentage. As a floor, paying at least 100% of last year’s total tax through on-time estimates (110% if last year’s adjusted gross income was over $150,000) protects you from the underpayment penalty, even if you owe more when you file.
Can I deduct my home office?
Yes, if you use part of your home regularly and exclusively for the business and it is your principal place of business. You can use the simplified method of $5 a square foot for up to 300 square feet, or deduct the actual share of rent or mortgage interest, utilities, insurance and depreciation. W-2 employees working from home cannot take this deduction.
Should I form an LLC?
An LLC is mainly a legal decision about liability. For tax purposes a single-member LLC is ignored by default and taxed exactly like a sole proprietorship, so forming one does not by itself lower your tax. The tax decision is whether to elect S corporation status, which an LLC can do.
When does an S corporation make sense for a freelancer?
When your profit is steady and high enough that the self-employment tax saved on distributions above a reasonable salary is more than the added cost of payroll, a separate business return and any state fees. That is rarely true in a first year with uneven income. We compare both ways on your projected numbers before you elect.
Which retirement plan should a self-employed person use?
A SEP IRA is simple and can be opened and funded up to your return’s due date, including extensions. A solo 401(k) usually allows a larger contribution at the same income, because you contribute as both employee and employer, but it has earlier setup deadlines for some contributions. If you have employees, the choice changes, because most plans must cover them too.
I did not get a 1099 from a client. Do I still report that income?
Yes. All business income is taxable whether or not a form arrives, and the IRS receives copies of the forms that are sent. We report from your books, not from the forms, and reconcile the two.
I have not filed for a few years. Can you help?
Yes. We rebuild the books, prepare the missing returns and deal with the IRS notices that usually come with them. An Enrolled Agent can represent you before the IRS, so you do not have to handle those letters yourself.
Become a client
Tell us what you do, how you are paid and what has been hard so far. We read every inquiry ourselves and reply within two business days to set up a 30-minute intro call.
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This page is general information, not tax advice for your situation. Rules change, and the right answer depends on your numbers; that is what the intro call is for.