1099 and W2 from the same employer

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RL1013
Posts: 46
Joined: Wed Mar 21, 2018 10:56 pm

1099 and W2 from the same employer

Post by RL1013 » Wed Oct 17, 2018 10:22 pm

All,

My employer asked if I am intersted in doing some consulting for him for which he will pay me by 1099. This is in addition to the w2 software development work I am doing for one of his clients. The consulting doesn't have anything to do with my w2 job as it involves training people who are in bench to get placed at different companies. On top of that, he told that he will add my referral bonuses through 1099. I was planning to register a new company (LLC most probably) starting next year to receive this 1099. I have the following questions.

1.I currently get some Amazon book royalty income which I am wondering if I can divert to this new company. Is it possible to put multiple side income under the same company?
2. Is there any tax advantage or disadvantage for this approach?
3. Will I be able to start SEP401k for this company for myself?
4. Any pitfalls I should be aware of?

RL1013
Posts: 46
Joined: Wed Mar 21, 2018 10:56 pm

Re: 1099 and W2 from the same employer

Post by RL1013 » Thu Oct 18, 2018 9:19 pm

Bumping up hoping to get some response.

michaeljc70
Posts: 3746
Joined: Thu Oct 15, 2015 3:53 pm

Re: 1099 and W2 from the same employer

Post by michaeljc70 » Thu Oct 18, 2018 10:39 pm

RL1013 wrote:
Wed Oct 17, 2018 10:22 pm
All,

My employer asked if I am intersted in doing some consulting for him for which he will pay me by 1099. This is in addition to the w2 software development work I am doing for one of his clients. The consulting doesn't have anything to do with my w2 job as it involves training people who are in bench to get placed at different companies. On top of that, he told that he will add my referral bonuses through 1099. I was planning to register a new company (LLC most probably) starting next year to receive this 1099. I have the following questions.

1.I currently get some Amazon book royalty income which I am wondering if I can divert to this new company. Is it possible to put multiple side income under the same company? Sure. I don't know anything about Amazon and changing that though.
2. Is there any tax advantage or disadvantage for this approach? Probably not.
3. Will I be able to start SEP401k for this company for myself? Yes
4. Any pitfalls I should be aware of? There is more work with having a company. You need to incorporate. You need to file state (unless in a few states) and Federal returns. If you just get a 1099 in your name, it goes on your personal taxes.
See above. Why not just get a 1099 in your name? It saves on the filings and keeps it simpler. However, and I have worked as a contractor for 25 years, many employers now will not give you a 1099 in your name especially after working for them as a W2 employee. They worry (sometimes reasonably so) that you could sue and be reclassified as an employee and subject them to a lot of taxes and regulations.

I have had some pay me on a W2, the issue is you cannot get all the tax breaks. You can only contribute to an IRA vs. a SEP, Solo 401k, etc. and cannot deduct you health insurance or expenses without itemizing.

RL1013
Posts: 46
Joined: Wed Mar 21, 2018 10:56 pm

Re: 1099 and W2 from the same employer

Post by RL1013 » Fri Oct 19, 2018 4:53 pm

michaeljc70, Thanks for your inputs.

Spirit Rider
Posts: 8916
Joined: Fri Mar 02, 2007 2:39 pm

Re: 1099 and W2 from the same employer

Post by Spirit Rider » Fri Oct 19, 2018 6:53 pm

michaeljc70 wrote:
Thu Oct 18, 2018 10:39 pm
There is more work with having a company. You need to incorporate. You need to file state (unless in a few states) and Federal returns. If you just get a 1099 in your name, it goes on your personal taxes.
If you have federal, state and local taxable business income. You need to file tax returns regardless of your business entity type. There is no need to incorporate to have a company.

michaeljc70
Posts: 3746
Joined: Thu Oct 15, 2015 3:53 pm

Re: 1099 and W2 from the same employer

Post by michaeljc70 » Fri Oct 19, 2018 7:19 pm

Spirit Rider wrote:
Fri Oct 19, 2018 6:53 pm
michaeljc70 wrote:
Thu Oct 18, 2018 10:39 pm
There is more work with having a company. You need to incorporate. You need to file state (unless in a few states) and Federal returns. If you just get a 1099 in your name, it goes on your personal taxes.
If you have federal, state and local taxable business income. You need to file tax returns regardless of your business entity type. There is no need to incorporate to have a company.
A company=corporation to me.

If you get a 1099 in your name you add a Schedule C with your 1040. It is a schedule, not a whole new return. I'm not a lawyer, but there may be other regulatory things that need to be filed to maintain the corporation other than taxes.

Big Dog
Posts: 884
Joined: Mon Sep 07, 2015 4:12 pm

Re: 1099 and W2 from the same employer

Post by Big Dog » Fri Oct 19, 2018 7:38 pm

4. It's probably a no-no wrt IRS, and likely your state labor laws. As an aside, depending on your W2 income totals, you might get hit for both sides of SS on the 1099 income.

trueblueky
Posts: 1362
Joined: Tue May 27, 2014 3:50 pm

Re: 1099 and W2 from the same employer

Post by trueblueky » Fri Oct 19, 2018 9:01 pm

I've had a Tax Aide client who was W-2 for lawn care and 1099 for pest control with the same company. No reason to believe the IRS cared. Their computers could certainly see that both came from the same EIN every year. Dept of Labor might care.

You will owe self-employment Medicare (plus SS if you haven't maxed that) and should look at making quarterly payments or increasing withholding.

Spirit Rider
Posts: 8916
Joined: Fri Mar 02, 2007 2:39 pm

Re: 1099 and W2 from the same employer

Post by Spirit Rider » Fri Oct 19, 2018 9:28 pm

michaeljc70 wrote:
Fri Oct 19, 2018 7:19 pm
A company=corporation to me.
This is a false equivalency that you don't get to make up as you go along. A corporation is a company, but a company most definitely does not have to be a corporation.

A company is any business entity that offers products and/or services. This includes a sole proprietorship, partnership or cooperation. Which can be a Limited Liability Company (LLC) encompassing any of the three.

michaeljc70
Posts: 3746
Joined: Thu Oct 15, 2015 3:53 pm

Re: 1099 and W2 from the same employer

Post by michaeljc70 » Fri Oct 19, 2018 9:38 pm

Spirit Rider wrote:
Fri Oct 19, 2018 9:28 pm
michaeljc70 wrote:
Fri Oct 19, 2018 7:19 pm
A company=corporation to me.
This is a false equivalency that you don't get to make up as you go along. A corporation is a company, but a company most definitely does not have to be a corporation.

A company is any business entity that offers products and/or services. This includes a sole proprietorship, partnership or cooperation. Which can be a Limited Liability Company (LLC) encompassing any of the three.
An Uber driver is paid on a 1099 and is a sole proprietor. Would you agree if they said they had their own company?

Spirit Rider
Posts: 8916
Joined: Fri Mar 02, 2007 2:39 pm

Re: 1099 and W2 from the same employer

Post by Spirit Rider » Sat Oct 20, 2018 8:38 am

They are engaged in a commercial trade or business with the intent to make a profit.

They are absolutely their own company. The size or scope does not matter.

RudyS
Posts: 1340
Joined: Tue Oct 27, 2015 10:11 am

Re: 1099 and W2 from the same employer

Post by RudyS » Sat Oct 20, 2018 9:04 am

This quibble over definitions is a waste of time. Google says:

com·pa·ny
/ˈkəmp(ə)nē/Submit
noun
1.
a commercial business.
"a shipping company"
synonyms: firm, business, corporation, establishment, agency, office, bureau, institution, organization, concern, enterprise; conglomerate, consortium, syndicate, multinational; informal outfit
"an oil company"

The Uber driver has a business, clearly. If you want to call it a company is of no consequence. Self-employment income is reported on Schedule C. No need for any specific structure.

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