After an extensive web search fiasco, it seems you are "the best-of-the-best" when it comes to answering tax questions for the self-employed artist! (CONGRATS! lol) I'm trying to learn ASAP what I need to do in my situation. I am a graphic artist.
I worked for the same company for 10 years. W-2 / $1000 every 2 weeks ...some months had 3 pay periods. I brought home approx. $850 every paycheck. NOW they want to 1099 me for a straight $2000 each month. So that's a pay cut.
I do work from home in my own office, but never took the deduction. I haven't a CLUE where to begin.
I bought a better house & cars not too long ago, so don't have a lot of money set aside...2 little girls...live-in fiancé altho the IRS doesn't know he lives with me because he owes them.
I was able to receive a decent earned income credit my accountant says. She's never charged me more than $100 to do my return.
Can't believe they are doing this to me after 10 years. I need to know how I can maximize this $2000 a month at taxtime or we aren't going to make it. I'm not sure how much to keep out for the IRS. Do I HAVE to pay quarterly or can I pay at the end of the year?
I just don't know what to do to keep my family afloat without getting punished by the IRS later. Liiving in Central IL doesn't offer much advice without a hefty pricetag. Any advice would be GREATLY appreciated.
Wow, Becky! I understand your fear, confusion, and not knowing which way to turn. Let's break this down into small pieces as you presented them. Then, as the mother of two, you need to take charge and deal with each piece.
The company you work for cannot legitimately switch you from an employee to a self-employed without making any other changes. Please read this post Employee vs. Self-employed. The company is doing it to save money and in the process will cheat you.
As an employee you were earning $26,000 per year [$1000 X 26 weeks]. As a self-employed you will earn $24,000 per year [$2000 X 12 months.] That save the company $2000. In addition to that, by paying you as a self-employed rather than employee, the company will save an additional 20% to 30% in payroll taxes and benefits. That's a minimum of $4800 [$24,000 X .2]. So the company is
saving approximately $6800.
It is fraud. Usually I suggest posts to read. I insist you read this post Homeland Security or Jobs 'n' Things . After you read it decide whether you want to pursue kicking this company in the rear or going along with it because you must keep the work. You say that you "Can't believe they are doing this to me after 10 years." People and businesses mostly do to you only what you allow them to do.
You have a "live-in fiancé altho the IRS doesn't know he lives with me because he owes them." How much does he contribute to the household? Anything? A fiancé may become a husband. His IRS problems then become yours. Yes, yours! He must take care of that now. Time for both of you -- or you alone -- to take on the responsibility of clearing up the financial part of your relationship with your future husband.
Is the father of the children paying any child support? If not, talk with the agency in your state of Illinois that will help you with that.
You also say that you may get "punished by the IRS." Where did that come from? Punished? The IRS collects the same taxes from you, from me, from every indie and from all employees. Don't blame the IRS because a company is engaging in fraudulent business practices.
If you accept the company's offer and do become self-employed you will find the answers to all the questions you asked above as well as how to get the lowest tax possible, how to keep records, and how to calculate and pay estimated taxes on this blog, on my site and in my book, Self-employed Tax Solutions.
You are not the victim. You are responsible for three lives -- yours and your two daughters. You need to review and take charge of the circumstances you are currently in. Women are tough. You can do it.
All the best,