What expenses can I claim for my 1099 estimated payments?

[themavrik75]

What is the name of your state? GEORGIA

What is the name of your state? GEORGIA

Hello everyone. Here is my situation: I used to be employed but my employer missed some my paychecks because they were having financial issues. I finally quit that job in 2005 but they been owing me money since 2001. The amount is $40,000. This year, with the help of a lawyer, we settled for $30,000 which they now paying in monthly installments and will issue me a 1099 (treating me as a contractor/vendor), which means I have to pay estimated taxes every quarter.

So, my question is what kind of expenses can I claim when I calculate my estimated taxes, knowing that I used to be an employee for the employee but was not paid regularly AND now I am being paid as a contractor?

- Can someone give me some pointers so that i can pay as less tax as possible?
- Apart from lawyer fees, what else can I claim as expense?
- Since I was owed $40,000 but will get only $30,000, can I claim a loss of $10,000?

Please advise.

Thank you all in advance.

Regards,
mavrik

[LdiJ]

Originally Posted by themavrik75

What is the name of your state? GEORGIA

What is the name of your state? GEORGIA

Hello everyone. Here is my situation: I used to be employed but my employer missed some my paychecks because they were having financial issues. I finally quit that job in 2005 but they been owing me money since 2001. The amount is $40,000. This year, with the help of a lawyer, we settled for $30,000 which they now paying in monthly installments and will issue me a 1099 (treating me as a contractor/vendor), which means I have to pay estimated taxes every quarter.

So, my question is what kind of expenses can I claim when I calculate my estimated taxes, knowing that I used to be an employee for the employee but was not paid regularly AND now I am being paid as a contractor?

- Can someone give me some pointers so that i can pay as less tax as possible?
- Apart from lawyer fees, what else can I claim as expense?
- Since I was owed $40,000 but will get only $30,000, can I claim a loss of $10,000?

Please advise.

Thank you all in advance.

Regards,
mavrik

This whole arrangement is somewhat irregular. You really need to take your settlement paperwork and go get a consult with a local tax consultant.

However, here are some thoughts (based on the thoughts of several different people in my office).

First, you don't have any expenses that you can deduct other than perhaps your attorney fees.

We don't think you are an independent contractor in this instance. We think its probable that you should be reporting this income on line 21 "other income" as a settlement of a lawsuit rather than on a schedule C as an independent contractor. Or, there is even the possibility that you should be reporting the income on form 4137.

If so, you would not be subject to self employment taxes, only regular income taxes, and perhaps the employee share of social security and medicare taxes. However, we don't know what all is stated in your settlement, and therefore would be hesitant to give you any firm advice.

Again, take your settlement paperwork and go see a local tax consultant.