Hello all. (23 y) I am starting a new WFH sales job that is 100% commission based. I am excited about it because I like the company I'm working with and there is $10k+/mo earning potential based on performance of course. I am new to the 1099 structure (independent contractor) and have previously been a W2 employee for all my past jobs and opportunities so I am a bit nervous with the new way I'll need to approach handling payments and taxes.
I have heard many people advise to open a new separate account specifically for commission payouts (in order to track earning and spending to write off during taxes). Does it have to be a business account or can it be another personal checking account within my bank? I most likely won't be able to write off mileage because it is a fully remote role but am interested to see if I can write off a new work computer, monitor, phone bill, etc.
I also know to save 30% of each commission pay out and put it in a separate account for taxes and also paying quarterly. I want to start off as financially organized and literate as possible to start but find myself getting confused on all of the jargon lol.
What are some tips you have as someone first starting as a 1099? ( ex. taxes, saving, new account, what bank should I go with to open up a separate account etc.) I will most likely hire a tax professional when it comes time for me to file but I want to make sure I have my best foot forward to start off. Thanks in advance!
New to Sales and 1099 Structure–Need Tips on Taxes
byu/Complex_Phone_7215 intax
Posted by Complex_Phone_7215
2 Comments
You’ve got a great understanding of the basics. Good job, usually people starting here don’t have these basics figured out.
For the quarterly payments, if your state has income tax remember that the state payments go to state, federal goes to federal.
If you running the business in your own name, it’s fine to use a personal account for tax and IRS reasons. Your bank may or may not require you to have a business account if they know it’s being used for business.
You should track all your expenses related to your 1099 work. This will help save you money on your tax bill. You can at least partially deduct the expenses for the work-related items you mentioned as long as they are used at least partially for business purposes (or 1099 work).
It sounds like your primary work location is your home office. You can deduct a portion of your home-related expenses, such as rent/mortgage, utilities, insurance, and internet, based on the percentage of your home used exclusively for business.
If you incur any fees, such as payment or platform fees for your work-related payments, you can deduct those and any professional services, such as hiring an accountant.
The key is to track your expenses regularly to be prepared and not miss any expenses at tax time. There are apps that can help with this, or you can use a spreadsheet or whatever means works for you – just keep good records!
You will want to track your expenses and income – you aren’t required to have a separate account for this, but it may help you stay organized. You will want to start making quarterly estimated income tax payments based on your net self-employment (1099) income. There are online calculators that can assist you with calculating your payments, or you can seek professional help from an accountant.