Question

W2 vs 1099/Sole Proprietor

Forum|Forum|6 years ago
August 2, 2019
3 replies
0 views

I am in sales and have the option of being a w2 employee or a 1099/sole proprietor. From a deduction perspective I already deduct my home office and other non-reimbursed business expenses (vehicle, etc.) as a W2. My question is: Will I benefit from becoming a 1099/sole proprietor from a tax perspective? Does this open me to more opportunities for deductions? Does the Trump tax plan help me?

X

xmasbaby0

Not going to tell you which to choose if you have the choice--but be aware that for 2018 tax returns and onward, as a W-2 employee you cannot deduct job-related expenses on your federal tax return. The new tax law changed that. So--if you get a W-2--no home office, no mileage, etc.

https://ttlc.intuit.com/community/tax-reform/help/which-federal-tax-deductions-have-been-suspended-by-tax-reform/00/25565

If you are self-employed, you pay self-employment tax of 15.3% for Social Security and Medicare, as well as ordinary income tax. You could enter business expenses on a Schedule C.

https://ttlc.intuit.com/questions/2902389-why-am-i-paying-self-employment-tax

https://ttlc.intuit.com/questions/2893577-does-a-1099-misc-mean-i-m-self-employed

https://ttlc.intuit.com/questions/2903027-how-do-i-report-income-from-self-employment

https://ttlc.intuit.com/questions/3398950-what-self-employed-expenses-can-i-deduct

You will need to do some math and decide.

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**

VolvoGirl

Sorry but starting in 2018 W2employee job expenses have been suspended and no longer deductible. So filing as 1099Misc Self Employed on Schedule C would let you deduct expenses.

Deductions that have been suspended for 2018

https://ttlc.intuit.com/community/tax-reform/help/which-federal-tax-deductions-have-been-suspended-by-tax-reform/00/25565

FAQ on 2018 changes

https://ttlc.intuit.com/community/tax-reform/help/how-will-tax-reform-affect-my-federal-tax-return/00/27627

M

miketothedAuthor

Thank you for that information. Would i also benefit from the 20% automatic deduction as a 1099/sole proprietor associated with the new tax laws? Between that 20% and the elimination of write offs for w2 employee seems like a no brainer even with having to now pickup self employment tax.

A

Anonymous_

@miketothed wrote:
Would i also benefit from the 20% automatic deduction as a 1099/sole proprietor associated with the new tax laws?

Perhaps, but there are exceptions, one of which is set forth below:

An SSTB is a trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, investing and investment management, trading, dealing in certain assets or any trade or business where the principal asset is the reputation or skill of one or more of its employees or owners.

Also, see the IRS web site (link below) for more information.

https://www.irs.gov/newsroom/tax-cuts-and-jobs-act-provision-11011-section-199a-qualified-business-income-deduction-faqs