jc
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Posts: 11
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Post by jc on Dec 26, 2013 17:52:22 GMT -5
Simple question, especially for the people who know first-hand about it:
When we file taxes, do we have to include the money we made from studies? I'm getting different answers, but I want to be sure.
Thanks so much!
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mike
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Post by mike on Dec 27, 2013 2:52:08 GMT -5
It's a safe bet that the IRS would tell you yes, as pretty much any form of "income" is taxable. You will have a hard time using a regular 1040EZ or even a 1040 to do your taxes if you are a lab rat, they are not set up for this kind of work. I would highly recommend filing as self-employed, this allows you great latitude to declare many of your expenses against your tax liability; such as food, motels, vehicle mileage; incurred while doing studies. With a little work, you can get your taxes down to nothing or close to it. But you have to put some work into figuring your expenses, otherwise the standard taxes for self-employed is basically soing like 15%, which would be very painful for most people to suddenly come up with on short notice.
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Post by diamond on Dec 27, 2013 10:43:29 GMT -5
Short Answer" Yes.
I've been doing studies and other 1099 type work (gigs) for the past 8 or so years. I never go to the same tax accountant... so I've gotten a LOT of answers to this questions... and they've all said YES.
Dude... even if you clean homes or cut grass for cash... you are LEGALLY required to report that income.
Doing studies, you'll get a 1099, usually sometime in January. The government ALSO gets a copy of this automatically... so there's no way around NOT paying the taxes.
Every accountant has made me file as 'self employed.'
I hope you kept a mileage log and all the receipts for drug-study related expenses. Hotel, gas, airfare. This will lower your taxable income.
Last year I think I paid around $2,000 in taxes. That's usually the norm for me.
TECHNICALLY, when you're self employed (which, if you do studies, you are), you're supposed to make quarterly estimated payments on your taxes. I never do this. I always pay the penalty... which I believe was only $65 last year. I'd rather just do it once a year and be done.
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Post by vark on Dec 27, 2013 14:11:57 GMT -5
Short answer yes. Longer answer, "yes but".
For most of us, who do studies regularly, it is self-employment income. That means we owe both income tax (if any) and self-employment tax (social security etc.) If you only do a study now and then and it is not your main income, you can list it as "other income" on your income tax, and not have to pay social security on it.
You only owe tax on your net, not your gross. That's pay less expenses. There are two kinds of expenses, actual and imputed. Mileage is imputed at I think it's 50 cents a mile. Each night you stay overnight for work out of town has an imputed deduction, around $50, although it actually varies a little by which city. That's to cover your meals and incidentals.
For the study i'm in, for example, the gross is 2550, but my expenses include mileage for 5 trips to wisconsin, 2 plane fares, 2 nights in a hotel. Then i write off my computer, my internet connection, some of my phone minutes, etc. It's going to add up to cover most of the 2550. There is free software online like taxhawk that walks you through it, take that info, go pay a tax preparer $100 so there's somebody else to sign the form and doublecheck your work. If they don't agree with all your deductions go get a second opinion.
So lets say studies are your only income, and you grossed $20K, but once you deduct all your expenses you are left with just 10K. Self employment tax (FICA, whatever they call it) is around 14%, $1,400. Next look at your income tax. With the standard deduction and the personal exemption, your income tax bill for $10,000 comes to zero. Next look at your state income tax. It's usually not much.
Of course if your gross was $40K, and your expenses are only $20K, you will wind up owing some income tax as well. Rough it out with free online software then go to a tax preparer or accountant or bookkeeper to find out what else you need to do to get the numbers down. Like, I am likely to need to end up putting some money in an IRA this year.
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mike
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Post by mike on Dec 27, 2013 15:31:14 GMT -5
They also allow you a deduction for food and miscellaneous while on the road for your work. The nice thing is, they have a standard formula you can use for each day, rather than actually digging up receipts for everything you ate, and every motel you stayed at. With this you can claim expenses of around $75 to $100 a day ( depending on the area you are in, as vark said ), then add the standard mileage rate for your vehicle; it was 55.5 cents for the last tax filing, and goes to 56.5 for the upcoming one.
The mileage deduction is where I have really been able to get my tax liability down, having driven thousands of miles per year that can be attributable to my self-employment.
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mike
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Posts: 334
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Post by mike on Dec 27, 2013 15:42:32 GMT -5
BTW, I have never payed any $65 penalty (never heard of it), I have never bought software to do my taxes, and I have never had to retain an accountant; I have always done my own taxes, it takes me maybe an hour or so, and I have always gotten my taxes down to a couple hundred bucks or less.
That being said, my income for the last few years has been around $16-17,000, if my income was higher, or complicated with other factors like other sources of income or employment, then my taxes might be more difficult for me to do.
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mike
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Posts: 334
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Post by mike on Dec 27, 2013 15:53:07 GMT -5
In my experience, the requirement to estimate and pay quarterly taxes is a state thing, not federal, and it applies to someone who has an actual state business/tax license. I don't think you need to worry about it if you're just self-employed.
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Post by antecubital on Dec 29, 2013 11:40:26 GMT -5
There are two kinds of expenses, actual and imputed. Mileage is imputed at I think it's 50 cents a mile. Each night you stay overnight for work out of town has an imputed deduction, around $50, although it actually varies a little by which city. That's to cover your meals and incidentals. Do you claim the daily out of town deduction while in house at a CRU?
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mike
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Posts: 334
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Post by mike on Dec 29, 2013 19:09:12 GMT -5
I don't think that doing that would stand up to scrutiny if you were audited. How can you say that you were providing your own food and lodging, or paying more than you would while at home when this is obviously impossible?
However it's not impossible that you can claim this; I claim the daily "motel" allowance even though I don't always stay in a motel and sometimes sleep in my van. Because it doesn't actually say that you have to stay in a motel, in fact I seem to recall that the instructions say you can claim the deduction for every night you have to spend away from your "home base" while doing your self-employment. So you may be able to push this.
The odds of getting audited if you make less than 30 or 40 grand is pretty slim, so it probably would not hurt to give it a shot. But if they throw you in prison don't blame me.
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Post by vark on Jan 16, 2014 6:07:04 GMT -5
There are two kinds of expenses, actual and imputed. Mileage is imputed at I think it's 50 cents a mile. Each night you stay overnight for work out of town has an imputed deduction, around $50, although it actually varies a little by which city. That's to cover your meals and incidentals. Do you claim the daily out of town deduction while in house at a CRU? I've wondered about that myself. I have not yet taken in this years taxes to a professional. The argument for doing it that way is that this rule exists to make taxes and record-keeping simpler and it applies to everybody, even if our situation is a little different from most. The counterargument would be that the site is providing meals and lodging. So I dont know for sure but I lean toward yes. I don't think subcontrators like us get to take the imputed hotel expense,only our actual hotel expense, but we do get to take the imputed meals and misc expense which is about $50 a day, although it actually varies a little based on what city you go to, making it pretty complicated to keep track of.
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