do you HAVE to have a business license to get (legally) paid for services rendered in which the customer will be filing a tax deduction?

i sold off my half of my company YEARS ago, but retained some customers and some contacts for whom i randomly do site design and (most often) maintenance on older sites and applications...i don't have a business license since i have no business, though i guess the argument could be made

in this case, it's a small non-profit with deep pockets, but no single contract is more than ~$800

now, i realize uncle sam wants his cut (especially since the customer will be filing for deduction), but i see no reason to pay for the full ~15% medicare/social security payout associated with being self-employed (where, in most cases, the employer pays half and the employee pays half) since they're working with an individual and not an actual company

anyone have a good idea of the procedure here? in the past, anything that wasn't a contract through my company was done under the table in cash (fuck uncle sam), but then i knew they weren't going to file for anything...i figure since there will be a paper and tax trail on their end, i should probably get my ducks in a row (though i think the amount of money is comparatively trivial)

11/25/2008 3:20:58 PM

Did they issue you a 1099 MISC form? Either way you are probably going to be responsible for the "self-employment tax." Also if you end up owing more than $1000 (or some other arbitrary figure the IRS comes up with) they are going to charge you interest on it.

For example, for the summer session in 2007 I worked as an "independent contractor" for a company and made just over $3k and was issued a 1099 MISC from the company. When I went to H&R block this past April to do my taxes I ended up owing ~$800 in state/federal taxes and the tax guy told me I was lucky that I didn't make much more than that, because I would have had to pay interest.

EDIT: The 1099 MISC was mailed at the beginning of 2008, just like a normal W-2 would be. I also would take those numbers with caution because I also worked another job and made a few thousand (don't remember exactly) at the beginning of 2007 that with-held taxes and I got a W-2 for.

[Edited on November 25, 2008 at 3:53 PM. Reason : i think im finished editing now]

11/25/2008 3:46:23 PM

yeah i can't believe your post was that long and you didn't mention 1099

http://www.google.com/search?hl=en&rlz=1C1GGLS_enUS291&q=1099+social+security+medicar

Quote :

"do you HAVE to have a business license to get (legally) paid for services rendered in which the customer will be filing a tax deduction"

no, in my mind that's what a 1099 is for.

Quote :

"but i see no reason to pay for the full ~15% medicare/social security payout associated with being self-employed"

i could [easily] be wrong but I don't think you'll be able to [legally] get away from paying ss/medicare taxes on this 1099 income. you think self employed people don't pay into the system? it doesn't sound like you're 100% self employed, but I think for the purposes of this money you are


I think 1099 income just gets lumped in with your other income and is taxed the same. (with fed/state income taxes ss/medicare etc), but I'm probably way off on this one. i bet Noen has some info on this...

11/25/2008 3:56:15 PM

some self-employed people (e.g. maids) don't have to pay into social security, but idk what the rules are

11/25/2008 4:29:41 PM

ah, upon further research, it appears that the law dictates that as long as the payment is less than $600, the client is NOT required to file a 1099-MISC

i, of course, am obligated to submit one regardless of whether they do, or not...it doesn't actually seem to matter, really, since it looks like i'm going to be required to pay the full thing

Quote :

"yeah i can't believe your post was that long and you didn't mention 1099 "

i've never filed one before...under the table FTW

thanks for all the advice...i don't know why i didn't pick up on the 1099-MISC earlier

11/25/2008 5:21:23 PM

Here's my experience.

If you make ~6000 or less, you are better off sucking it up with the 15%. That's the point where the cost of forming a corporation, insurance, filing, taxes, et al ends up costing more than the tax break will.

If you are making 10k+ a year, incorporate.

In either case, find a good, private accountant who has tax experience in your type of business and pay him/her to do your taxes. Avoid the big tax houses H&R Block et al. They will fuck you continually. One of the best ways to do this, especially if you are above that 10k level, is to call local firms that do the same thing you do, and ask who prepares their taxes.

You can also call the NCDOR and ask to speak to a small business representative. I've had great luck and gotten good information over the years from them about my tax responsibilities, credits available, discounts, etc.

Also, in Raleigh you must legally file for a business license here:

http://www.raleighnc.gov/portal/server.pt/gateway/PTARGS_0_2_103016_0_0_18/Business_License.pdf

You should register as an Engineer if they will allow it. Otherwise you will have to pay a city tax based on your income as well.

[Edited on November 25, 2008 at 5:42 PM. Reason : .]

11/25/2008 5:35:49 PM