It seems that people forget that when they are an independent contractor getting a paid on a 1099 can create a huge tax liability.
If you have a “Schedule C” business, you recognize your 1099 income and get to deduct related business expenses. But any profit is subject to self employment income.
Even if you have the ability to eliminate all of your AGI with your itemized deductions and exemptions you will still be subject to self employment taxes. You have to cover both sides of your self employment FICA.
Being a 1099 employee can be empowering. You work for who you want, you work when you want, and you have client deadlines but tremendous freedom to do the work done.
But that freedom comes with a cost, you are responsible for both sides of FICA on all profits.
So plan accordingly, for help contact our office.