Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.
05-15-2017 02:04 AM
Files jointly. - My spouse has W2, my employer allows me to select 1099 or W-2 in medical field job and rate is the same for either 1099 or W2. My husband and I make pretty much the same money too.
Does filing jointly help reduce 1099's FICA Social Security and medicare tax? Or I still need to pay full 15.3%? I want to know since my spouse w2 already pays some portion of the FICA, does that help pay for mine too?
Also, besides the tax write-offs advantage, I want to know what else can 1099 help me on in terms of the taxes. Should I pick W-2 instead to make things easier or will I benefit more with 1099.
We have no kids, no loans, just rent an apartment. Thank you very very much for your time.
05-15-2017 10:24 AM
Welcome to the H&R Block community.
So if you're paid as an independent contractor (1099-MISC) what that means is that no taxes will be withheld from your pay (except for federal income tax withholding if you request it). You will owe a total of 15.3% of your own income between the social security and Medicare taxes no matter what although you will get a deduction for 1/2 of these taxes on the 1040. Filing jointly or your spouse having a W-2 job is not going to reduce the FICA taxes. The only way to reduce the FICA taxes is with excess withholdings from a W-2 job or with refundable credits. The main benefit of being an independent contractor is the ability to deduct unreimbursed expenses directly from income, so if you know you will have a lot of expenses then going with the 1099-MISC option may be worth it.
As a W-2 employee, on the other hand, you will only pay 7.5% in social security & Medicare taxes, and your federal income tax will be withheld (select 0 exemptions on your W-4 for federal withholding if you have a high income of $50,000 or more). You can still take unreimbursed expense deductions as a W-2 employee but they are taken on Schedule A and subject to a couple of limits, including that your allowable deduction would be your total expenses less 2% of your adjusted gross income. The main benefit of being a W-2 employee is that you don't have to pay the employer part of the FICA tax, so your taxes are considerably lower.
If you have any other questions I'll be glad to help.
Senior Tax Advisor (Tampa, FL)
05-15-2017 12:22 PM
Thanks Louis for sharing your insight. So my spouse has W2, and if I have 1099 and file jointly, do we have $12,700 standard deductions? Or it would be only $6,350? If we have a standard deduction of $12,700, then I can still deduct unreimbursed expenses directly from income on top of that $12,700?
Would property home tax or rent from my apartment be consider deductible for a 1099 even though I live there and I don't necessary work there? Thank you again.
05-15-2017 04:41 PM - edited 05-15-2017 04:42 PM
If you have a 1099-MISC then you can deduct expenses directly from the 1099-MISC income on Schedule C. You cannot deduct the expense of your apartment unless you have a qualifying home office that is your primary place of work and that does not apply to you. You can however deduct things like the cost of uniforms, work shoes, a work phone, miles driven (if you drive your own vehicle for work purposes), supplies for work, meals required during working hours (for example if you're a firemen you would probably work long shifts and have to buy meals while you're stationed at the firehouse), and any other unreimbursed work-related expense.
You get a standard deduction of $12,600 no matter what (probably $12,700 for 2017 since it increases every year for inflation). The only way you won't get the MFJ standard deduction is if you itemize deductions on Schedule A as a W-2 employee and that's because when you complete Schedule A it takes the place of your standard deduction. So if you have a 1099-MISC yes you will be able to deduct expenses and take the standard deduction.
The key to a 1099-MISC is knowing how much tax to expect so that you won't end up owing something that you're not ready for when you complete your return in February.
If you would like, if you know about what your income would be, click on my name and send me a private message with both of your and your wife's expected incomes and a guess at your expected expenses and I'll calculate the return both ways for you so that we can see which way will save you the most on the tax.
05-18-2017 03:12 AM
Thanks for your response. I sent you a private message. Let me know your thoughts when you get a chance. Thanks!