[magnumpl]

Hello. I am depressed after I came from a CPA tax agent but as my friends told me its not possible that I could pay such taxes. I would be really grateful if someone could help me with my tax math. Let me get you into my situation.

– I am 24 years old

– I live in New York – LI

– I started an S-Corp this year so I am a self employment,

– I get the 1099 form from the office that im working for,

– I have a spouse who does not have SSN-just ITIN, no income

– My income is 29k after deductions such as fuel, insurance etc.,

– I am still on Medicaid health insurance but it ends in one month

– My annually living costs are about 28k so I am using all the income that my business makes,

So I end up with $0 every month, now as my taxable income is $29k I will lose my insurance so I wont be able to pay for health insurance which is over $300 monthly. I still have to pay tax from the $29k. As the agent told me I have to pay tax for Social/Medicare – 15,3%, Federal – 15%, NY State -5%, I dont think its true. But I end up with no money to pay it, of course I have family who could help but what kind of life is that…

So my question is – Will I lose my Medicaid ins? How much tax will I have to pay? Does my income deduct if my spouse does not have SSN?

Thanks in advance.

[PharmBoy]

That is materially correct.

If someone is self employed, including 1099 contractor pay, they must pay both the employee and employer halves of Social Security and Medicare (FICA) taxes. That's 15% on their first $118,500 of net income in 2016, straight off the top.

Federal Income Tax (FIT) is also due on income. I don't know all your details but another 10-15% for FIT seems in the ballpark for $30k AGI.

I don't know anything about New York State income tax, nor New York City income tax, except that they exist.

Also, being self-employed, be aware you need to pay estimated tax every quarter or be subject to penalties.

[gigabyte2001]

When you say your income is 29k, is that net business income, agi or taxable income? If it's net business income, you will pay 15.3% SE tax, and get half of that back as an adjustment to AGI. Then you deduct standard deductions for MFJ, & exemptions for both of you. Mathematically:
29k business income is $4437 of SE tax. 29k less 1/2 SE tax = 26.8k less MFJ Standard of 12.6 and Exemptions of 8 leaves taxable income of 6.2k which i think is at 10% federal, and assuming 5% state leaves $620 and $310 respectively.
Total due to Fed is $4437 SE plus 620 Fed Inc tax $5,057 and $310 to NY.

More or less anyway. If on the other hand the 29k is after standard deductions & exemptions, the total tax due is significantly higher.

B - 11/11/16
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R - 2/17/17
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[Anonymous]

Op. These last two posts are very incorrect. First off a corporation should not be 1099d. Corporatios are not 1099 d including s corps. Tell whoever 1099d the corporation not to do so in the future and fire their current bookkeeper. Secondly scorp income is not self employment income and u will not pay the 15% fica tax. The above posters are misinformed and are confusing partnership and s corp rules. I assume u are taking out the money as distributions since u make no reference to payroll. Remeber as an s corp owner u r required to pay urself a reasonable salary which will be subject to fica. If u r a start up u may be able to argue there is no money for a salary at this time but that will be scrutinized if challenged. The income from the scorp u receive on your k1 will be subject to federal and state income taxes according to ur tax bracket which has many other factors involved. I do not have time to get in to that discussion today.

[PharmBoy]

@magnumpl I got the impression the 1099 was for an office job you worked in addition to your new S corp. My bad.

I'm glad @C9p9a9 was able to review your financials and sort out your situation better than the CPA you spoke to before posting.

[magnumpl]

There you very much for all your response.
The 1099 is issued to the corporation, I get checks under the corporation. My total income is $36k for working about 54-58h a week, my tax deductions are around $7k (fuel, job accessories, business start-up cost, business assets etc) so it gives me $29k taxable income. It is the first year that I will claim tax return on my own, I was a dependent (child) last years. I use/spend all the money that the corporation makes for living costs, is that considered as my salary?
Can you tell me more about 1099 under the corporation, why cant it be issued?
I am wondering about Medicaid, I wont be able to pay insurance but I will probably lose it as my income is higher than $23540, my spouse does not have SSN so she cant be considered as my dependent and included in Medicaid family plan, is that correct? CPA told me that he is sure that I will keep my insurance.
So there is really no point of keeping the corporation, are there any consequences after closing a just-formed corporation?
For now I know that my annually payments would be $5367 + ~$4300 (for insurance) + $600 (CPA charge) + $400 unemployment (because im not considered as an employee) = $10667. Am I right?
What are my best options?

[nadroj]

Ever heard of Spicer Accounting, Inc., 918 F.2d 90 (9th Cir. 1990)?

Just sayin'

[Author]

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