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FAQ

What paperwork is needed to flip houses legally?
Here’s my thoughts on your comments, but please consult an attorney/accountant for legal & tax advice.Do you need a Business Licence?This will depend on your local municipality, so check with your local Business Commerce Department.What Business Structure?If you are wanting to flip houses it’s a good idea to setup an LLC. An LLC can be used to protect your assets from liabilities that could happen while flipping houses.If you elect to file as an LLC w/ an S-Corp election you may be able to save on Self Employment taxes by paying yourself a reasonable salary. All other profits about and beyond your salary would be taxed at regular tax rates (excluding SE Taxes). Please consult with an accountant for tax advice.Employee vs Indpendent Contractor?This is a decisions you will have to make internally as to how you want to manage your projects. You could hire full-time employees to repair your properties, or hire an outside Independent Contractor to manage the work.If you are working with an Independent Contractor you will need an Independent Contractor Agreement.Here’s an Example of an Independent Contractor AgreementLocation needed? (Office, Room…)No, you do not need an Office to flip houses. Most house flippers just work from home. Unless you scale your business to having multiple full time employees, I see no reason to have an office space.Here’s a list of 8 Other Documents that You Might Need to Work with a Contractor:Initial Contract Negotiation DocumentationContractor Pre-Qualification FormIndependent Contractor AgreementScope of WorkPayment ScheduleForm W-9Proof of InsurancePost Rehab DocumentationSigned Receipts/Lien WaiversForm 1099-MISCDocuments You Need to Work with a Contractor
Asking Lyft to explain why "guaranteed hourly wage" isn't really a guarantee, Lyft said that driving for Lyft wasn't a job. What is it then?
A job is when an employee works for an employer in a well-defined social construct where the employer labors on behalf of the employer and does what the employer says to do (within limits, of course) and when the employer says to do them in exchange for a wage or salary plus incentives and bonuses. Employees get W2 forms each year from their employer. By federal law, the employer pays half of the payroll tax (which is at least 15% total) on behalf of the employee. The employee pays an equal amount (FICA / Medicare taxes) which are deducted on their pay stub).Lyft is not a job. It’s a series of gigs, each of which has its own compensation and requirements. Lyft drivers are independent contractors working under a contractual agreement with Lyft, and are not employees. That means that they can drive when they want and where they want and can choose whether or not to accept any particular ride request. If they were employees, they would drive where Lyft told them to drive, when Lyft told them to drive, and would need to accept most if not all of their ride requests. Lyft drivers who earn above a certain amount (which varies by situation) get 1099 forms each year from their employer. There is no withholding for independent contractors, but when they file their taxes, they are required to pay a self-employment tax that is equal to the total amount of the payroll tax paid by both the employer and employee if they were actually employees instead of independent contractors.What’s more, if drivers were employees, Lyft would be subject to a whole host of federal and state laws that would make managing those employees almost impossible. In other words, Lyft and Uber and their rates as we know it would not be possible if a judge ever declared Lyft and Uber drivers to be employees rather than independent contractors.Admittedly, some of what Lyft (and Uber) do blurs the lines between the employee/employer relationship and the contractual relationship, but there are incredibly strong incentives for Lyft (and Uber) to keep drivers as independent contractors rather than employees, so you can count on them lessening, not tightening, their efforts to manipulate and control their drivers.
How should the compensation be described in an independent contract agreement?
I've been an independent contractor, and I contract work out to independent contractors. The first thing to note is that the status of independent contractor requires very specific conditions otherwise you'll be considered by the IRS (and probably your state) to be an employee. If your client wants you to act like an employee (i.e. be on-site, use their equipment, work the hours they want you to, etc), then you are an employee no matter how they designate you, and that spells trouble for them. If you are truly an independent contractor, then there are many things your contract should clearly address. Your compensation agreement can take almost any form (the most common of which are time &  materials or milestone payments). Unless you're working on very clearly defined projects, I recommend T&M. This form of compensation is the clearest, as there are no undocumented expectations (e.g. 60-70 weeks or vacation). Your contract should clearly specify the payment terms.  If the contract only specifies an annual salary, your client could, theoretically, pay you a lump sum at the end of the year, and they might take 6 mos. to pay you (if there's an implication that you'll simply be paid like an employee, then you're probably an employee). Your contract should specify who owns the IP for the work you do, if you're entitled to use their name (you probably want to be able to tell future employers what you did for that year), etc. These are standard terms in most consulting services agreements. Do your homework? Know what you're willing to do and what you want. Having a detailed contract like this may seem unnecessary, and it is...  until it isn't. If there is an issue, and there often are, the leverage lies with the party that has the money (i.e. not you). Good developers are a highly valued commodity, and you probably have more leverage to negotiate these things than you think. But, be reasonable. They're your client after all. Lastly, be mindful of the tax implications of being a 1099 contractor. You can figure it out yourself, but given the structure of your question here, I highly recommend talking to a tax preparer who's knowledgeable in the are of 1099 contracting.
Why does our customer need us to provide a W-9 form?
Why is my customer asking for Form W-9?An entity (“the payer”) that makes payments in the normal course of their business is required to report certain specific payments to both the IRS and to the person or entity paid (“the vendor”) at the end of each year. This is typically done using Form 1099. The IRS calls this “Information Reporting” and the process is similar to the way that employers report wages on Form W-2.Therefore, when the payment for a product or service is required to be reported on Form 1099, the payer must have the vendor’s taxpayer identification number (TIN). The TIN is the way the IRS identifies the vendor in their records. The TIN is typically a social security number (SSN) or an employer identification number (EIN).When the IRS receives the payment information on Form 1099 they compare that information to the income the vendor reported on their income tax return. If the vendor’s tax return does not include all the payments reported on Form 1099 then the IRS will likely take steps to determine why all income earned was not reported.Consequence of not submitting a W-9If the payer does not receive a TIN number from the vendor, the payer will not be able to specifically identify the vendor on Form 1099. The IRS will then require the payer to reduce their payment to the vendor by 24% and remit this amount to the IRS (See our blog on backup withholding).The IRS will hold the payer responsible for this 24% if they don’t obtain the TIN number or withhold 24%. Additional penalties and interest could also be assessed on top of the 24%. Therefore, most payers put procedures in place to obtain the vendor’s TIN number in advance of making any payment. Requesting Form W-9 to be completed is the standard process that the IRS has created for payers to obtain the TIN number.CONCLUSION: Vendors are not required to submit a Form W-9, however, the likely result would be a 24% reduction in the payment to them by their customer.Examples of Information ReturnsExamples of information returns that use information from Form W-9 include, but are not limited to, the following:‡ Form 1099-INT (interest earned or paid)‡ Form 1099-DIV (dividends, including those from stocks or mutual funds)‡ Form 1099-MISC (various types of income, prizes, awards, or gross proceeds)‡ Form 1099-B (stock or mutual fund sales and certain other transactions by brokers)‡ Form 1099-S (proceeds from real estate transactions)‡ Form 1099-K (merchant card and third-party network transaction)‡ Form 1098 (home mortgage interest), 1098-E (student loan interest), 1098-T (tuition)‡ Form 1099-C (canceled debt)‡ Form 1099-A (acquisition or abandonment of secured property)Use Form W-9 only if you are a U.S. person (including a resident alien), to provide your correct TIN.For more information on Form W-9 visit our blog at https://www.w9manager.com.
As a freelancer, how do I officially hire another freelancer to help with some tasks?
Hey. You’ll find that when you have a freelancer who is reliable and efficient, that will go a long way into helping you become much more effective in your freelancing business. You can easily scale up with two or three reliable ones.One place to find freelancers is in a freelancing FB group that you know of. You can even ask the admin if they are able to refer a reliable one.You can also hire one on Upwork.Make sure that you:Ask for relevant samplesSend them a contractLet them know of the deadlinesAgree on a mode of paymentDepending on the project, ask them to do a short assessment to proof their skills in case they are newbies.
My client wants me to sign an IC agreement after I have already invoiced them and have been paid. Do I need to sign this?
You mean a W-9, not a 1099. Everybody paid $600 or more gets a 1099 after they send in the W-9.They should have given you the IC agreement before you started, or before you got paid (in which case they owe you the money anyway, but at least they would have a say). Better yet, you should have your own IC agreement to give to clients who don't have their own. The sources in decreasing cost are: (1) have your own lawyer, customize it for you; (2) join a professional association, special interest group, or at least a meetup ‡ they will have some form development agreements; and (3) google is your friend, there are lots of sample agreements on the web. Also, if you do the work through eLance, Fiverr, etc., I think most of them have a default standard agreement that gives the client the rights they typically need. They cover issues specific to contractors, like whether you can include your work on your portfolio.In my practice I have a post facto rights assignment agreement to sign if the whole project gets finished, delivered, approved, and paid for. That's actually easier than dealing with everything beforehand, but it assumes that the project was completed to everybody's satisfaction and paid for, which is huge if. So I don't recommend it, but we use it in cases like yours. The assignment says you give them the rights to everything you delivered: a complete assignment to the extent it was custom or incorporated stuff they own; a license if it's public stuff or part of your toolkit; and no promise if it incorporates third party material with permission ‡ for example, if you included a Corbis Image you can't promise them any more than the license you go from Corbis. But it doesn't have all the stuff that makes an IC agreement so long, provisions about specifications, delivery, change orders, payment terms, rejection rights ‡ so it's only a page or two.On the one hand I think it's only common courtesy and decent business practice to give a client a full rights assignment. If they were too naive or green to know they needed one, or if you were dealing with a poor corporate drone who just wasn't thinking straight, you should have known and told them instead of pulling a gotcha on them. Your refusal will make their life slightly miserable, which is terrible customer service. If they're a startup seeking funding, their investors are going to ask them if everybody who contributed anything to their code, design, etc., signed an agreement. The very fact that you didn't means they have to tell their lawyer, their lawyer has to include it as an exception to the representations and warranties they make in connection with the investment, and they're going to pay their lawyer $500 or more every time they have to deal with the fact that you didn't sign the contract. Your refusal will not really help you but it will cause them pain.On the other hand I would be very careful about signing any old IC contract a client throws at you. They often contain nasty little easter eggs like non-competition clauses, rights assignments that would suggest that anything you include in your delivery or even used to complete the project (even libraries, clip art, a new version of Photoshop or Django you bought to complete the project) gets assigned to them, you promise you own it. Or if they ever get sued you have to pay for their lawyers, and indemnify them against third party claims: if McDonald's sues them for a billion dollars because what you designed is false advertising for your client's hamburgers, they can continue using it and collect the billion dollar damages from you (as if you had it). It's a bit of a conundrum, they don't want to have to hire a lawyer right now, nor do you, to just give them a signature that lets them check off the box.
What is the best way to subcontract in the US, tax-wise?
The short answer: very carefully.   The issue is whether or not your workers are in fact employees.  The IRS has a multi-factor test regarding this. The essence of the test is that if it looks like an employee, it acts like an employee, then it is an employee.  Sure, you can dress it up like an independent contractor, but unless your work arrangement falls into the category of independent contractor, you run the risk of it being classified as an employment relationship, regardless of whether you issue a 1099 or not. BTW, Mark's answer is incorrect, insofar that issuing a 1099 does not automatically make payment to a contractor deductible. The facts and circumstances govern.  You must familiarize yourself with the law and (1) have a contract agreement in writing, (2) document your payments, (3) get a W-9 form before paying them, and (4) issue a 1099 at the end of the year. Also, and critical, you must not treat the "contractor" as an employee.  Don't pay benefits, don't have them work doing things that employees typically do, and don't refer to them as employees. You can find some excellent information on the IRS website.... I leave it to you to google this, because there are multiple cites, and a little "rooting around" will prove educational.We have some good information regarding these issues on Home - Certified Entrepreneurial Advisor
I am a US citizen and live in the US but I work remotely for a Danish company. Do I file taxes as if I am self-employed?
You are either an independent contractor, or you are an employee. As Kevyn Nightingale has suggested, the determination is based on your specific facts and circumstances. Note that if the facts and circumstances surrounding your situation support a determination that you are an employee, your employer is violating US law by not withholding the appropriate taxes. There is a totalization agreement between the US and Denmark, and that agreement specifies that US-based employees are subject to US law for Social Security, so if you are an employee, your Danish-based employer is expected to comply with US law on SS and Medicare withholding when you are based in the US.If you believe you are an employee based on your facts and circumstances, then the proper path for you to follow would be to:File Form 4852 (substitute W-2) to report your compensation, since you didn't receive a W-2;Report your compensation on Line 7 of Form 1040;File Form 8919 to report and pay your share of the unpaid Social Security and Medicare taxes, using Reason Code G;Separately, file Form SS-8, requesting a determination of your status for purposes of employment taxes and withholding.Many people in your situation opt not to challenge the employer in this way, largely because it does involve the risk of losing the job. I'm sympathetic to that position, however I think in the long run you wind up costing yourself more by not challenging employers - who are, after all, violating the law by calling employees "independent contractors" yet retaining employee-level control over their working conditions.By the way, your Danish employer should at least have provided you with Form 1099-MISC, assuming you earned at least $600.