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Paying Taxes on 1099 Income

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  • cgossage
    replied
    Great! I just wanted to make sure you were aware of the tax-advantages investment options specific to self-employed income. Getting your debt paid off in a year is a worthwhile endeavor of its own.

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  • Curious George
    replied
    Thank you for the quick response! I'm glad that I will only have to file taxes in one state, although both have similar tax rates, so I'm not sure it matters.

    All of the debt is student loans at 3.62%, but I'm taking the Dave Ramsey/MMM approach and throwing everything at it and should be done by the end of 2018. That should allow me to focus on building wealth starting 2019, when I plan to start contributing to a 403, 457, and backdoor Roth IRA.

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  • cgossage
    replied




    Long time reader, first time poster. I have a few questions about paying taxes on 1099 income and hope you all can help!

     

    Background: I moved to a different state at the end of 2017 for a new job and received a signing bonus from the new job without any taxes taken out while I was still living in the old state. The new job is now issuing me a 1099-MISC for the amount of the signing bonus as I was not an employee at the time that they paid me the bonus. I did not have any other income in the new state, including employment income from the new job, in 2017. (I started working in January 2018).

    In 2017, 100% of my income was W2 in my previous job in state A except for the 1099-MISC income from my new job in state B.

     

    Questions:

    (1) Do I have to file tax returns in both state A and state B or just in state A, where I was residing when I received all of my income in 2017?

    (2) I am kind of kicking myself for asking for the signing bonus at the time I signed the contract instead of being paid to me with my first paycheck at the new job. Am I right to feel this way or would it not have mattered?

    (3) Are there any advantages to this 1099 income tax wise? (Further background: I’m still focused on getting out of debt, so I don’t have any extra money to throw at investment accounts.)

     

    Thanks!
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    Good question.  You only have to file taxes in the states work was performed.  Since you weren't an employee yet, no work was performed so you will only need to file a state return in state A.

    As far as advantages, they are somewhat limited since you specify you want to focus on debt, but you can deduct any self-employment expenses against the income in your Schedule C.

    I know you said you didn't want to throw money into investment accounts, but you could also contribute to a SEP for 2017 which would help lower your tax bill.  Of course, you will eventually want to roll this into a Solo-k or your employer 401(k) in the future so you will be eligible for Backdoor Roth contributions.

    I am curious if it is high-interest credit card debt or lower, student loan debt.  If it is the latter, most on this forum (myself included) would encourage you to consider investing in a tax-deferred account while at the same time working to pay down debt.  If it is higher interest credit card debt, then yes, by all means, take care of it first.

    Leave a comment:


  • Curious George
    started a topic Paying Taxes on 1099 Income

    Paying Taxes on 1099 Income

    Long time reader, first time poster. I have a few questions about paying taxes on 1099 income and hope you all can help!

     

    Background: I moved to a different state at the end of 2017 for a new job and received a signing bonus from the new job without any taxes taken out while I was still living in the old state. The new job is now issuing me a 1099-MISC for the amount of the signing bonus as I was not an employee at the time that they paid me the bonus. I did not have any other income in the new state, including employment income from the new job, in 2017. (I started working in January 2018).

    In 2017, 100% of my income was W2 in my previous job in state A except for the 1099-MISC income from my new job in state B.

     

    Questions:

    (1) Do I have to file tax returns in both state A and state B or just in state A, where I was residing when I received all of my income in 2017?

    (2) I am kind of kicking myself for asking for the signing bonus at the time I signed the contract instead of being paid to me with my first paycheck at the new job. Am I right to feel this way or would it not have mattered?

    (3) Are there any advantages to this 1099 income tax wise? (Further background: I’m still focused on getting out of debt, so I don’t have any extra money to throw at investment accounts.)

     

    Thanks!
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