[thelist] contract work questions

Janet Green JGreen at desmoinesmetro.com
Wed Jun 26 08:30:01 CDT 2002

>>>I don't know how taxes and things are involved in this. I did several searches on google with
various terms and I'm really coming up empty handed.<<<

Tax laws are different in every state, so you need to find out if your services are subject to sales tax. You can call your state's department of Revenue and Finance for this information. If your services are taxable (certainly the parts and equipment you purhcase/resell are taxable), you will need to apply for a sales tax collection permit from your State and calculate sales tax on each invoice. When your customer pays your invoice, you set aside the amount that covers the sales tax and then periodically submit your collected sales tax to the state. Again your state Dept of Revenue can help you get set up for this.

As far as income tax, you are responsible for keeping track of all your income and then reporting it on your tax returns each year, and of course paying taxes on it. You should already be paying income taxes through your regular job, but you need to consult a tax specialist to find out if you are paying in *enough* to cover your total projected income (including contract work). Unless you want to owe the govt. money at the end of the year, you may need to begin paying in a portion of the contract work income to cover yourself. A tax specialist can set you up with information on how/where/when to submit taxes. When you do your tax return, then, you will either get a refund or end up owing more money.

Obviously, I'm not a tax specialist and am just trying to show you how this works rather than give you specific rules and such. It's important at this point that you find an accountant or tax preparer to help you, so you can get good advice as far what expenses may be deductible. You need to treat your contract work as a serious business right from the start, though, so you don't end up missing out on deductions and so you end up owing the least amount possible at the end of the year.


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