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Post by pablopicasso on Jul 19, 2014 16:03:12 GMT -5
This is more for you experienced lab rats. How much do you guys typically set aside for taxes you'll owe to the IRS? Looking at the IRS 1099 schedule it looks like anything under approx. 30,000 will be taxed at 15% so let's say you made $20,000 - $3500(deductions for gas, hotel, etc) = 16,500 x .15 = 2475 owed to the IRS. Does that seem about right? Or do you have to factor in things like Social security taxes? It's funny how some guys I met at a couple of studies were like taxes? I've never had to pay taxes on any of the studies I've done!
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Post by ac on Jul 20, 2014 9:13:47 GMT -5
I've heard some guys say they've never paid taxes on study money. The fact is you are required to pay taxes as a self-employed person. Every study you do you fill out paper work and that info is passed on to the IRS so they know how much you make. If you don't pay, you may get away with it for a while but you will likely get caught and when you do you'll have to pay all back taxes and penalties and interest which could cost you over $10K. If this is your primary source of income then you have to file as self-employed which means you have to pay 15% just for SS and Medicare in addition to income taxes. When you work for a regular employer you pay 7.5% and the employer pays 7.5% but we have no employer so we have to pay all of it. I think when you actually file there is a deduction that actually knocks that down to about half so you only end up paying around 7.5% anyway. So if you earn $20,000-$3500 expenses=$16500. You have to pay the 7.5% on the entire $16,500 so that's $1237.50 just for that part. Assuming you're single filing as a single person then you pay nothing on the first $10,150 because of personal exemption and standard deduction that everyone gets to use. So $16,500 income-$10,150 deductions=$6350 taxable income. The first $9075 of taxable income is taxed at 10% so $6350 X 10%=$635 in federal income tax. $1237.50+$635=$1872.50 in Federal income tax. You may get other deductions as well but you shouldn't pay more than $1872.50 in federal taxes with your income example. You may have to pay state taxes as well but that will be far less. So if you put aside 10% or just a little more you should be fine unless your taxable income is over $19K then you'll be taxed at a higher rate.
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Post by pablopicasso on Jul 20, 2014 18:23:47 GMT -5
Thanks a lot AC, this was extremely helpful
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Post by hairyscarylarry on Jul 21, 2014 8:49:30 GMT -5
I've been to several accountants over the past 8 years (how long I've been doing studies), with several different companies, one of them even teaches tax law at the local college, and all of them are Enrolled Agents. That means these guys specialize in tax law. (I specifically seek out Enrolled Agents to do my taxes).
I've had always kept a mileage log thinking that would be a tax deduction. I was quite bummed when each one of these accountants told me that the mileage is not deductible unless my work involves more than one location.... in the SAME DAY.
For example, driving from my house to my workplace is NOT deductible, but driving from my workplace to Location #2, #3, etc., IS DEDUCTIBLE. But this all has to happen in THE SAME DAY. So, this does not apple to studies... unless perhaps you screen at more than one clinic in the SAME DAY.
Like, a real estate agent, for example, who is also self-employed. They can't deduct from home to their first location, but they can deduct for every location after that in the same day (showing houses).
The same applies to us. I'm not sure about airline costs and hotel costs, as I stay local.
One thing I will say is DO NOT go to H & R Block. I went to them in 2009 and they charged me $416 just to DO my taxes. They said it was because I was self-employed and had a lot of 1099's. My local community college offers tax prep for FREE if you make less than $50,000/yr. The accounting professor double checks the students' work, so its legit. Since I started going there, I've paid the LEAST in taxes. This past spring, I only paid about $800 in taxes. There were some years when I paid $2,000 and I usually make around $20,000 a year.
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Post by vark on Jul 22, 2014 12:52:30 GMT -5
AC's advice is right on the money. However, a person who makes $20,000 from studies could probably find way more than $3500 in expenses.
I think larry was badly advised. Or maybe his situation is different than mine because he stays local; all my studies involve driving (50 cents a mile presumed expense), often hotels (actual money spent on hotel, usually around $40 a night), imputed travel expenses when away from home for at least a day of around $50 a day (it actually varies by city, complicated, but you can get a rough estimate.)
For those of us who are professional lab rats, it's self-employment income and that includes fica but also lets us take all legit expenses. for those who only do a study once in a blue moon, it can be listed as "öther income" and avoid fica. the decision whether or not to file is an individual one about which i express no opinion, but all of us lab rats should keep meticulous records, both for ourselves and the taxman.
anyone making over 50K from lab ratting (how would they do that?) should get an accountant. otherwise larry's advice about free from a local college is good, but it can help to get a second opinion. taxhawk, taxact, etc., have free online versions that help you rough out an answer, do that before you take your info to a professional to double check.
i think the clinics are deliberately negligent in not helping lab rats understand how to do their taxes. my guess is many of the "casuals" don't bother to report the income, and if the income is less than 10K they probably won't get audited. on the other hand somebody bringing in 30K to 50K and not reporting it will raise some red flags. most clinics won't issue a 1099 for less than $600, so if your only pay from that clinic is $50 for a screening visit, it's kind of up to you to declare it (or not.) i advocate doing so in the interest of completeness, and then you typically have mileage or other expenses that offset the screening fee.
standard disclaimer: i am not your lawyer, and never did tax law; get a professional.
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Post by jaylak on Mar 19, 2016 23:49:38 GMT -5
My apologies for this being a question to an older post, however to piggyback onto the tax filings and 1099s, does anyone know first hand, or know of anyone who has experience with establishing an actual inc or llc and using your ein to file taxes? as opposed to filing as an individual? i guess, sort of like treating your studies as a full-time income/business, instead of just a casual thing for extra money?
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