Hi All, I was curious about being taxed on your winnings come Tax Day. I’d like a little insight from SH creatives that have been on here a year +. Any information would be helpful. TY!
@CRen, SH will send you a 1099 to sub with your taxes.
I am an independent contractor in my “regular” life so I just loop it in with the quarterly taxes I have to pay on all my other work. In other words, I pay the taxes on SH quarterly based on my estimated tax rate (which I figure out every year). Then I get the 1099 (like I get from my clients, too) and tell my accountant what I paid in quarterlies. Then, the accountant does my taxes and tells me if I overpaid or if I am short.
If you are not an independent contractor, you may be able to wait until tax time. But you really should talk to a tax expert about how you should manage it. If you are winning a lot, it could be a lot of money to pay at tax time. So at minimum, you should set aside what you think might be your tax liability each month so you have it come April.
@Commulinks thanks so much for the quick reply! Is there a rough % that you set aside quarterly based on your earnings? Also, what kind of “expenses” do you claim for write-offs? Trying to keep as much $ as possible in the end I mean hey, we earned it!
The % you would set aside would be based on your own income tax rate which takes you and potentially your spouse into consideration. Because I am a 100% independent contractor, I also have to pay a high other %age for something called self employment tax (basically, that is social security) on a portion of my earnings. (I think that is 21%). The IRS has a lot of info on their site about this.
I go through a complicated eval every year to figure out what my quarterlies will be. I base it on the percentage of taxes I paid on 1) my total income without taking my expenses into account and 2) An estimate of what my taxable income will be based on deductions from the previous year. Somewhere between those two is the right number. The IRS has a form for figuring this out, but it never seemed to work right for me!
If you have another full-time or part-time job with an employer, you could just have extra taken by your employer for the extra taxes. That’s a nice way to limit brain damage. PS;; Don’t forget state taxes!
As far as expenses go, again because I am a full-time contractor it may be different for you. I use quickbooks and guidance from my accountant to determine what is acceptable to the IRS.
So, I didn’t really answer your question because it is different literally for everyone and every situation. I just happened to already be set up to do this and I’ve been a contractor for a long time. But let me tell you, it SUCKS BIG TIME when you underestimate your taxes!!!
@Commulinks ugh, why can’t it be easy?? . . . .Thank you for going into detail for me - you’re right, everyones situation is different, no clear cut answer. I’ll ask my tax lady and maybe just put 25% aside in the meantime. I’ll check out that form you were talking about with the IRS too - thanks a bunch!
I went the less complicated route, the only affordable one for me😕.I let my tax people put all the info from my 1099 and the program they used automatically figured out what I had to pay. Then deducted that from what I would be expecting to receive back on my tax return.That’s because I don’t work so had nothing else to turn in. Wasn’t the best return money wise I’ve recieved…but my earnings on here go along way .The old saying you win some,lose some…Lol it’s all good😃
That is a great point, Mary. If you normally receive a refund, this may not be a big issue. For me, I have to calculate everything because I don’t have any other regular taxes taken from a paycheck or anything.
Same here. I just bring the 1099 to the tax guy at tax time and they take care of it. I also have my winnings in a separate account and keep 25% of each win off limits to myself. It never has been 25% that had to be paid, but that’s my easy round number. So when I still have some of that 25% left over at the end, it feels like another little win. Also, if you are in the US, tell your tax person that it is “Freelance earnings” and NOT contest winnings – taxes are less on freelance than winnings.
That’s good to know Jackie…when my taxes were done last year…she said they were miscatagorized on the 1099…so she put a note on it saying they were contest winnings. I didn’t know you could say freelance earnings.But if you list them as freelance…are you categorized as having a job then, as opposed to having contest winnings?
Boy, I’m glad you brought this up Jackie because I never explained that to my accountant. I’ve just included it as income just like all my other 1099 income. I had no idea there would/could be a difference.
Such great feedback here - thank you for chiming in. Taxes are such a hassle so all this info is so valuable, especially the freelance vs. contest winnings.
Contest winnings are something like when you win some money from Publishers Clearing House. Or maybe you won a car from the Price is Right or a house from HGTV, that’s a contest winning.
At SquadHelp you are an Independent Contractor and are considered self-employed by the IRS. https://www.irs.gov/individuals/self-employed
And this is a problem with calling the briefs contests and thinking that the money is some sort of prize when it is actually earned income.
I’ve always done my own taxes, with the assistance of software, and one of the major benefits is that by doing your own taxes you are forced to learn at least some parts of the complicated tax code. For instance, if you make a few thousand dollars or more at sites like Squad Help, buying a computer would be considered a tax deduction since you would use the computer to make your income. You probably wouldn’t want to claim a 100% deduction, but you could certainly get away with 80 or 90%. If you use a room in your home as an office, you can deduct a percentage of your rent, electricity, and heating from your income. The percentage of the deduction is based on the percent of square footage. Home mortgages can get a little more complicated if you sell your home.
I keep all of my receipts and file them away based on month, and then separate them based on year. This makes it so much easier when you are looking for deductions in April. Anything you use to make your Independent Contractor Income can be a tax deduction. Anything from computers, to tablets, a new mouse, or a bigger monitor and on and on.
@Arnet Thank you Also, I think a percentage of your internet bill can be used as a tax deduction too.
Arnet, I really really appreciate that post because I started to get nervous! I just assumed I could because it fits so much with what I already do!
Hey Alwritey, I am hesitant to click on that… what is it?
It’s a link to an article on The Motley Fool’s site re: “Home Office Tax Deductions” - It’s cool- I checked it out.
Thanks Jackie very good to know…now if I can remember come tax time…lol
@AlwriteyThen nice! The more info the better - anything to do so we don’t feel “jiipped”
I am confused how we are self employed or an independent contractor,when we enter contests. We don’t actually work for SH. To my understanding, they are more of a marketplace who provides us a connection with contests you can enter,and the pay out is by the CH not SH.So why aren’t these contest winnings? Especially since you can work extremely hard and long hours, with no pay. So if you were self employed, or an independent contractor…wouldn’t that mean you were contracting for money,and expecting your work to be compensated? Doing this does not guarantee you a dime of pay, unless the CH chooses your entry,which makes it a contest. Can someone please explain? Thanks