tax deductions of worker who are not licensed contractors
Wholesaler · Hagerstown, MD · Member since 2015 · 4 posts · 0 votes
i have an LLC and i purchase about 8 rental properties per year. 2015 was my fist year in business. I originally did the majority of work on the properties my self in the evening and weekends as i have a regular full time job about 50 hours per week getting off around 5 pm monday-friday. To try and turn properties faster i have been paying my son $12 an hour cash and allowed him to bring in one friend who is working for $10 an hour cash. The current property is the first one i have done this on and the billing hours is around 400 for this project. My question is how can i write off this $4000+ expense, i read on this site 1099. is that accurate. I would like to continue using them without them falling under the employee umbrella. We are located in the state of Maryland.
You have them each fill out a W-9 and have them invoice you for the work performed. It would be wise to pay them by check so you have record of payment. Then you give them each a 1099 for payments made in that year. It doesn't matter if they are licenced or not, it is only to report money paid to someone else for services in the course of business. In turn, those paid will have to report it on their taxes and pay taxes on the income.
You still have time to do this for tax year 2015, as the 1099s are not due to be postmarked until January 31.
* Disclaimer: I am not a CPA or tax consultant. You should of course consult your CPA for all tax questions.
You have them each fill out a W-9 and have them invoice you for the work performed. It would be wise to pay them by check so you have record of payment. Then you give them each a 1099 for payments made in that year. It doesn't matter if they are licenced or not, it is only to report money paid to someone else for services in the course of business. In turn, those paid will have to report it on their taxes and pay taxes on the income.
You still have time to do this for tax year 2015, as the 1099s are not due to be postmarked until January 31.
* Disclaimer: I am not a CPA or tax consultant. You should of course consult your CPA for all tax questions.
You have them each fill out a W-9 and have them invoice you for the work performed. It would be wise to pay them by check so you have record of payment. Then you give them each a 1099 for payments made in that year. It doesn't matter if they are licenced or not, it is only to report money paid to someone else for services in the course of business. In turn, those paid will have to report it on their taxes and pay taxes on the income.
You still have time to do this for tax year 2015, as the 1099s are not due to be postmarked until January 31.
* Disclaimer: I am not a CPA or tax consultant. You should of course consult your CPA for all tax questions.
Beth may not be a CPA or a tax consultant, but she has states this accurately and concisely. This is the exact procedure you should follow.
I am not familiar with your state, but in NY and Pa I would expect they would be employees in the eyes of the workers comp folks. Maybe not your son, but his buddy would be. Maybe your son too, based on his age. Not saying this is def. the case but you may want to look into it.
You're paying them cash for a reason right? To avoid payroll taxes and insurance?
Maybe you're not realizing it but you'd be documenting your illegal activity if you record it for a deduction? This move would be similar to a drug dealer taking a deduction on his taxes for the meth he bought wholesale from his source.
Keep in mind per Beth's advice, about 1099ing them, the reason for 1099's is for the IRS to have a paper trail to follow the money back to the source to see if there are further taxes due to a miss-classified sub-contractor which is what the boys are.
The chances of you being caught when you're paying them just cash would be much less so than if you actually reported what you are doing to the IRS would it?
You're paying them cash for a reason right? To avoid payroll taxes and insurance?
Maybe you're not realizing it but you'd be documenting your illegal activity if you record it for a deduction? This move would be similar to a drug dealer taking a deduction on his taxes for the meth he bought wholesale from his source.
Keep in mind per Beth's advice, about 1099ing them, the reason for 1099's is for the IRS to have a paper trail to follow the money back to the source to see if there are further taxes due to a miss-classified sub-contractor which is what the boys are.
The chances of you being caught when you're paying them just cash would be much less so than if you actually reported what you are doing to the IRS would it?
I'm not telling them how to do their jobs in any compactly. I am telling them what needs done and how I want the finished product to be color , layout etc... I am not overseeing their work in the same manner a boss would to workers. I am trying to avoid payroll, insurance and the other things that come along with it but once again I am not on location during the day when they are work to observe their work .they are not doing anything that would require a license such as plumbing or electrical
You have them each fill out a W-9 and have them invoice you for the work performed. It would be wise to pay them by check so you have record of payment. Then you give them each a 1099 for payments made in that year. It doesn't matter if they are licenced or not, it is only to report money paid to someone else for services in the course of business. In turn, those paid will have to report it on their taxes and pay taxes on the income.
You still have time to do this for tax year 2015, as the 1099s are not due to be postmarked until January 31.
* Disclaimer: I am not a CPA or tax consultant. You should of course consult your CPA for all tax questions.
Thank you Beth for the helpful information
i have an LLC and i purchase about 8 rental properties per year. 2015 was my fist year in business. I originally did the majority of work on the properties my self in the evening and weekends as i have a regular full time job about 50 hours per week getting off around 5 pm monday-friday. To try and turn properties faster i have been paying my son $12 an hour cash and allowed him to bring in one friend who is working for $10 an hour cash. The current property is the first one i have done this on and the billing hours is around 400 for this project. My question is how can i write off this $4000+ expense, i read on this site 1099. is that accurate. I would like to continue using them without them falling under the employee umbrella. We are located in the state of Maryland.
Being these are rentals you are not required to 1099 them; however, you should be paying by check to document the actual expense.
You have them each fill out a W-9 and have them invoice you for the work performed. It would be wise to pay them by check so you have record of payment. Then you give them each a 1099 for payments made in that year. It doesn't matter if they are licenced or not, it is only to report money paid to someone else for services in the course of business. In turn, those paid will have to report it on their taxes and pay taxes on the income.
You still have time to do this for tax year 2015, as the 1099s are not due to be postmarked until January 31.
* Disclaimer: I am not a CPA or tax consultant. You should of course consult your CPA for all tax questions.
Beth may not be a CPA or a tax consultant, but she has states this accurately and concisely. This is the exact procedure you should follow.
I agree they both SHOULD receive 1099s; however, it is technically not required for landlords to issue 1099s.
You have them each fill out a W-9 and have them invoice you for the work performed. It would be wise to pay them by check so you have record of payment. Then you give them each a 1099 for payments made in that year. It doesn't matter if they are licenced or not, it is only to report money paid to someone else for services in the course of business. In turn, those paid will have to report it on their taxes and pay taxes on the income.
You still have time to do this for tax year 2015, as the 1099s are not due to be postmarked until January 31.
* Disclaimer: I am not a CPA or tax consultant. You should of course consult your CPA for all tax questions.
Beth may not be a CPA or a tax consultant, but she has states this accurately and concisely. This is the exact procedure you should follow.
I agree they both SHOULD receive 1099s; however, it is technically not required for landlords to issue 1099s.
If I deduct what was paid to the workers to get the properties rent ready, if I claim I paid then 50k over the course of the year. As an LLC wouldn't it be required , not so much from the landlord stand point
You have them each fill out a W-9 and have them invoice you for the work performed. It would be wise to pay them by check so you have record of payment. Then you give them each a 1099 for payments made in that year. It doesn't matter if they are licenced or not, it is only to report money paid to someone else for services in the course of business. In turn, those paid will have to report it on their taxes and pay taxes on the income.
You still have time to do this for tax year 2015, as the 1099s are not due to be postmarked until January 31.
* Disclaimer: I am not a CPA or tax consultant. You should of course consult your CPA for all tax questions.
Beth may not be a CPA or a tax consultant, but she has states this accurately and concisely. This is the exact procedure you should follow.
I agree they both SHOULD receive 1099s; however, it is technically not required for landlords to issue 1099s.
If I deduct what was paid to the workers to get the properties rent ready, if I claim I paid then 50k over the course of the year. As an LLC wouldn't it be required , not so much from the landlord stand point
Whether or not an LLC has to actually been a great course of debate among accountants. If you can 1099 them I'm of the opinion to do so to protect yourself.
You have them each fill out a W-9 and have them invoice you for the work performed. It would be wise to pay them by check so you have record of payment. Then you give them each a 1099 for payments made in that year. It doesn't matter if they are licenced or not, it is only to report money paid to someone else for services in the course of business. In turn, those paid will have to report it on their taxes and pay taxes on the income.
You still have time to do this for tax year 2015, as the 1099s are not due to be postmarked until January 31.
* Disclaimer: I am not a CPA or tax consultant. You should of course consult your CPA for all tax questions.
Beth may not be a CPA or a tax consultant, but she has states this accurately and concisely. This is the exact procedure you should follow.
I agree they both SHOULD receive 1099s; however, it is technically not required for landlords to issue 1099s.
If I deduct what was paid to the workers to get the properties rent ready, if I claim I paid then 50k over the course of the year. As an LLC wouldn't it be required , not so much from the landlord stand point
Whether or not an LLC has to actually been a great course of debate among accountants. If you can 1099 them I'm of the opinion to do so to protect yourself.
I am of the opinion that you should issue 1099s where you can, and not just to increase my fees. Issuing 1099s is a pitifully small part of what I do, so it's not like that's a profit center. It's because of the debate Stephen mentions. There has been so much back and forth on who has to do it, exactly how much effort has to be put in to get W-9s and the like that, for me, it's worth it to just do it and be on the safe side than to not do it and get hit with a penalty.
The biggest problem with the IRS is that they are sloooooowwww.... You can get hit tomorrow with a penalty for something you did or didn't do 3 years ago. I personally don't like those kinds of surprises, so I'd rather do everything up front to prevent it ahead of time than deal with it in the future.
It's no big deal to collect a W-9 and issue a 1099. There are services that will do it for you that are incredible inexpensive.
I often refer to the website Track 1099 which is very reasonably priced.
The biggest problem with the IRS is that they are sloooooowwww.... You can get hit tomorrow with a penalty for something you did or didn't do 3 years ago. I personally don't like those kinds of surprises, so I'd rather do everything up front to prevent it ahead of time than deal with it in the future.
Exactly...I just got a $59 fine for failing to pay estimated taxes in 2012 on an LLC that made absolutely no income & the voucher issued by my CPA showed none due.