No. of Recommendations: 0
Hi,
I was an employee until May of this year. I'll be starting a consulting assignment as independent contractor soon and have a few questions. The contract is out of state - Reimbursed partially thro' Per Diem.
1) Do I need to report Per Diem ? Is it on 1099 ?
2) Can I take full deduction for unreimbursed expenses - travel, good, logdging, utilities, other ?
3) Do I pay 15.3% FICA on (Earnings - expenses) eventhough I've already paid Social Security on earnings as employee for half year.
4) On a W2, does the employer pay 7.5 % on all earnings or they also have a max limit for Social security portion like the employee does ?
5) Is there any other way to reduce FICA taxes ?
Thanks,
Gaya
No. of Recommendations: 5
1) Do I need to report Per Diem ? Is it on 1099 ?
One way or another, yes. Either report it as income, or reduce your expenses by the amount reimbursed.
2) Can I take full deduction for unreimbursed expenses - travel, good, logdging, utilities, other ?
Yes. As long as they are ordinary and necessary for your work.
3) Do I pay 15.3% FICA on (Earnings - expenses) eventhough I've already paid Social Security on earnings as employee for half year.
Yes. Your total earnings subject to Social Security tax are limited to $90k this year. Your earnings as an employee will be considered when figuring how much of your self-employment income is subject to Social Security tax. For example, if you have $70k on a W-2 and earn $50k as a self-employed person, only $20k of your self-employment income is subject to Social Security taxes.
Remember that the Medicare portion (2.9% out of the 15.3%) goes on forever.
4) On a W2, does the employer pay 7.5 % on all earnings or they also have a max limit for Social security portion like the employee does ?
They have the same limit you do.
5) Is there any other way to reduce FICA taxes ?
Claim all of your allowable expenses.
Make less money.
Make so much money that the $90k limit just becomes noise in the overall picture.
If conditions warrant it, consider using an S Corp to shelter some of your income from FICA taxes.
--Peter