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#1 eclipsed4utoo  Icon User is offline

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Freelance/Independent Contractor Question

Posted 08 January 2010 - 08:26 AM

I was recently contacted by a world-renown university to do some development work for them. I was asked if I would be able to be an independent contract, and sending them invoices for my work.

This would be the first time I had done invoices for my work. So I started doing some research on what I had to actually do to be an independent contractor. I found this site, which is a government site, which basically states that I need to create my own company and go through all the tax and permits stuff.

Is this true? Do I really need to create my own company? I don't want to be audited by the IRS, but I also don't want to do way more than I need to do.

So to those that work from home and send out invoices, what did you actually do to get started? How do you file your taxes every year?

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#2 awesomesauce  Icon User is offline

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Re: Freelance/Independent Contractor Question

Posted 08 January 2010 - 09:47 PM

View Posteclipsed4utoo, on 8 Jan, 2010 - 07:26 AM, said:

I was recently contacted by a world-renown university to do some development work for them. I was asked if I would be able to be an independent contract, and sending them invoices for my work.

This would be the first time I had done invoices for my work. So I started doing some research on what I had to actually do to be an independent contractor. I found this site, which is a government site, which basically states that I need to create my own company and go through all the tax and permits stuff.

Is this true? Do I really need to create my own company? I don't want to be audited by the IRS, but I also don't want to do way more than I need to do.

So to those that work from home and send out invoices, what did you actually do to get started? How do you file your taxes every year?


Yes you have to get a federal tax id number. You have to also get a business license. You also have to keep very good track of all invoices that you bill out because when you have your own business doing your taxes takes on an entirely new meaning. It can be a hassle but there's many benefits especially all the tax write offs you become eligible for. I have never subbed out services as a programmer but have done a lot of independent work in other fields.
Best advice i can give about the taxes is hire an accountant to handle it and get you set up.
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#3 dsherohman  Icon User is offline

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Re: Freelance/Independent Contractor Question

Posted 09 January 2010 - 05:42 AM

The actual requirements vary quite a bit depending on where you live and how you intend to do business. If it's a small enough operation that you're comfortable doing it as a sole proprietor/sole trader instead of forming a corporation/LLC, you may (again, depending on your local laws) be able to proceed without needing to register anything simply by including your legal name in the company name - at one point, I worked for about 6 months in Minnesota under the company name "David Sherohman Technical Consulting". Since that identified me sufficiently, I didn't have to file a DBA ("Doing Business As") or anything else of the sort when I started up.

As already mentioned, though, you're going to want to hire an accountant to handle the additional complexity introduced by business tax codes. Ask him about how to set up your business to both comply with your local laws and put you in the most advantageous tax position and he should have good advice for you. The accountants I've worked with (from two different firms) have given me free initial consultations, at which they gave me excellent advice on these topics, so you should be able to make an appointment and go in to figure these things out without having to front any money out-of-pocket.
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#4 no2pencil  Icon User is online

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Re: Freelance/Independent Contractor Question

Posted 10 January 2010 - 12:10 AM

View Postawesomesauce, on 8 Jan, 2010 - 10:47 PM, said:

Yes you have to get a federal tax id number.

Not necessarily.

As as American Citizen you already have a federal tax id number, & this is your social. You can file income that you earn on an independant basis on a 1099 form, using your social security number.

It would be a wise move to get an LLC, giving your business a new Federal Tax ID number. But as long as your business is just you, you are not required to do this.

View Postawesomesauce, on 8 Jan, 2010 - 10:47 PM, said:

You have to also get a business license.

& where does one get this "business license"? All you need to do is report the income. If you are selling a taxable service, you will need to get a vendors license so that you can file sales tax with your city & state. But you do not need any sort of licensee to run a business.

View Postawesomesauce, on 8 Jan, 2010 - 10:47 PM, said:

You also have to keep very good track of all invoices that you bill out because when you have your own business doing your taxes takes on an entirely new meaning.

Again, not if you are filling out a 1099 form. You only need the detailed information for when you get an audit. & how detailed is keeping a copy of an invoice? Please. It's not as big of a deal as you make it out to be. The IRS doesn't care to the finest letter as to what you did for business practices. They mostly care that you pay your bills on time. Now if you get audited, then they will verify that your deductions & income are legit. But nothing more than standard paper work (invoices & receipts) are required.

After re-reading this, it looks like I just said what you did :P

View Postawesomesauce, on 8 Jan, 2010 - 10:47 PM, said:

Best advice i can give about the taxes is hire an accountant to handle it and get you set up.

This is absolutely true. Just make damn sure you do a background check on them 1st. This is one situation you don't want to get the wrong company.
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