Race shops and 1099's

[elsancho]

I've been working for a few race shops the past year and would like some feedback from other fabricators about the most effective/economical way to set oneself up for getting paid through 1099s. Filing status? LLCs sole proprietorships etc and what you would and would NOT write off. Thank you

 

[Brandt_Anderson]

I've been working for a few race shops the past year and would like some feedback from other fabricators about the most effective/economical way to set oneself up for getting paid through 1099s. Filing status? LLCs sole proprietorships etc and what you would and would NOT write off. Thank you

It depends on a lot of things, but generally you don't need to do anything other than give them a W9 with your SSN and call yourself a sole proprietor. It can be expensive to set up as LLC or SCorp, so numbers have to be run to see if it's worth it. If you make enough to justify it he ongoing expense S Corp is likely the best way to go.

Write off anything and everything that is even remotely related to business, tools, equipment, business meals, travel, car, gas, insurance, phone, education. There are specific rules about some of these things and the amounts or percentages that can be written off in a given year, but keep track of all of them for the time being.

I would offer more details but this is what I do for a living, and I've yet to meet a fabricator who works for free so I guess a CPA shouldn't either.

 

[frozenh2o]

Yep, sole proprietor is the least expensive with minimal complication and simple taxes. It is the preferred method if you have limited personal assets. On the downside it provides zero protection for your assets if you screw up and someone sues you.The LLC and Corp. offer some asset protection, but aren't bulletproof. If you are truly negligent they'll come after your personal assets anyway, and they can defeat the legal protections if they try hard enough. Comes down to what assets do you own, how much you want to spend on liability insurance, and your tolerance for risk. The tax implications for a one man band are minimal between the different filing methods.

What to write off? As Brandt said, everything remotely related to your business. If you are nervous about an audit, then things like a home office, or lots of meals/entertainment can throw red flags. An audit is no big deal, but before you try to write something off, ask yourself "Can I defend my position on this expense?"

 

[JDDurfey]

I was a self-employed contract mechanic for 6 years with no employees. In Texas it is very easy to set up an LLC and I did it myself online to try to remove some personal liability. In doing so, my personal taxes and business taxes are one in the same, so my CPA told me so I didn't need to put myself on the payroll. I could have one bank account for everything and at the end of the year just write off what was a business expense. That makes it easy, but I would suggest having two accounts and transfer funds for all personal expenses and then at the end of the year, if you don't have a receipt for something, you can use your bank statements for your write off record.

I am no CPA, but I definitely believe a good one is worth every penny you pay them. As far as what to write off, I agree with pretty much everything that was stated.

On the liability side of things, I had $500,000 in liability insurance also, which is a tax write off. It only cost me as a mechanic around $1000 a year. Some of my customers required it, and since I often worked inside other peoples shops I figured if I started a fire and burned the place to the ground it would be better than paying out of pocket. As far as equipment went, my service truck and tools were mine personally, but I "leased" them to the company which was a tax write off. Then, if I was sued, the company had no assets to speak of and there was nothing to go after. I also had Workers Comp on myself, even though I was not required to because I had no employees. I did this just to give me a little more health coverage in case I was hurt or in a car wreck while "on the clock"

Don't take anything I have said as law, check it all out for yourself, but this is what I did and it worked for me. I am no longer self-employed, but will be again someday I am sure. For now, it is better for my marriage to bring home a steady paycheck and at the end of the day, I am almost making the same and have benefits to boot.

 

[partybarge_pilot]

When I was doing this, I had a good tax guy. He knew what could be written off without issue and what would throw up red flags. It was well worth the money as I never got audited or had any penalty's. He wrote off a lot more things than I would have and some of them I hadn't even thought of trying to write off.

 

[Josh 8]

Pay the quarterly withholding taxes. Better yet just pay 10% to the state and 30% to the Feds out of each check. Then get a good tax person like others before have said and you will get some money back each year.

If you don't do it this way the down side is that you will ruin your life for a number of years after the state and Feds get ahold of you for not paying them about 2 or 3 years down the road. There worse about taxes then back child support.

I seriously caution you. If you fall behind there is no forgiveness. Only penities that compound.