Home Based Business Legalities

Should I be 1099′d or not? Client wants me to make the choice?

Putting aside the legalities of this question, should I ask to be 1099′d? I could claim the deductions for having a home based business if I get 1099′d. Otherwise I could get paid in cash and not claim the deductions. The total monies received this year will be around $2000. What am I better off doing financially? I’m not asking for legal advise here, as I know the legal issues involved.

There are three ways a client can pay you:

1) As employee, W-2

2) As contractor, 1099

3) As nobody, no paperwork, under the table

Sounds like they don’t want to pay you as (1), so it’s (2) and (3).

(2) You do all the taxes and file them yourself. Remember IRS requires you to have an actual OFFICE as “home office”, else you’ll have a hard time justifying the deductions if they audit you.

(3) Under the table payment is tax evasion, and may subject you to penalties and lack of social security contributions. Not exactly a problem if you have a main job.

—
Kasey C, PC guru since Apple II days
KEEP OUT! Trespassers will be violated!

Home Based Business Legalities

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