Every year, nearly 7 million Americans start 1099 contracting for the first time. It’s a great way to make money on your own schedule… but taxes will be more complicated than you may have realized.
If you're used to W2, it may come as a shock that 1099 tax payments weren't being set aside during the year. Hopefully you’ve been setting money aside!
The only exception is if you’ve been paying estimated taxes (also known as quarterly tax payments). Most 1099 contractors don’t bother with estimated taxes because it’s a lot of work and the IRS hasn’t historically punished people for it. That said, we recommend doing them in 2019, and of course Keeper makes it dead simple.
If you earned more than $600 from a 1099 source, you'll need to pay taxes on it. Your employer has already notified the IRS about paying you so there’s no getting out of it.
And it’s quite expensive. For example, if you made $50,000 in 2018 (after tax write offs), you should expect to owe about $15,000. If you don’t have that kind of money in your bank account you should try and claim more tax write offs (we can help), or - at worst - take out a loan.
"If you made $50,000 in 2018 (after tax write offs), you should expect to owe about $15,000 in taxes."
This is the part where you can save serious money. Your everyday expenses such as a phone bill, gas fill ups, a new computer, and maybe even part of your rent can be claimed as tax write offs at the end of the year. Use our tax write off guides to identify which of your purchases qualify as tax write offs - it’s probably more than you think!
For example, forgetting to include something small, like parking fees for $10 per week, could be over $500 in tax write offs over the course of a year and translates to $150 in your pocket in actual tax savings. It’s not nothing!
Weren't keeping track receipts for your expenses last year? Don't worry! You can use Keeper to automatically find tax write offs from your bank statements.
"... something small, like parking fees for $10 each week, could be over $500 in tax write offs over the course of a year."
Typically in the last week of January, companies that paid you as a 1099 contractor will send you a 1099 form by mail or email. Freelancers typically get a 1099-MISC, while platforms like Amazon, Uber, etc will send a 1099-K.
This form is important because you’ll need it to file, and because it contains significant tax write offs (for example, the cut that Uber takes is a tax write off found on your 1099-K).
You can either try to do it yourself, go to an accountant, or file online. Doing it yourself isn’t fun and we don’t recommend it (unless you love taxes, like us!). An accountant is hit or miss (depending on how much experience they have with 1099), and quite expensive. We recommend just doing it online with one of the many services available.
If you’re willing to pay $100+, you can use H&R Block ($117), or TurboTax ($130). If you want something cheaper and are willing to put up with a less appealing user experience, we recommend Credit Karma Tax (free!), or TaxSlayer ($47).
If you use Keeper, we’ll send you step-by-step instructions at year's end for exactly where to plug in every tax write offs we’ve found for you for each of the above services.
Keeper finds tax deductible expenses among your purchases ... automatically! Save $1000s a year claiming the tax write offs you’re eligible for as a contractor.