Ask the cubicle expat: I had a mix of 1099 and W-2 work in 2008 — are my taxes messed up beyond repair?

February 2nd, 2009

We talk about taxes a fair amount on this blog. But before we go any further, I would like to remind you that I am not an accountant or any other form of tax professional. So please take the advice you are about to read as one freelancer’s experience and not the gospel of IRS law. (In legalese that’s “I’m not responsible for what happens with your tax bill.”) And if you have any tax questions whatsoever, consult your tax professional or tax software of choice. Okay, on with the question…

Liz writes: At the beginning of 2008, I was a freelance Photoshop retoucher for a photographer in NYC.  Halfway through the year, I took on another part-time contract job with a larger company and was eventually hired on full-time in October 2008 (which subsequentially ended my freelancing career). My questions are:

(1) Having had freelance, contract, and full-time employment this year, will this seriously screw with my taxes, since some of the taxes were taken out and some were not? (The corporate job took out taxes, the photographer did not.)

(2) Unfortunately, I have had a hard year transitioning between these jobs, and I’m afraid I will not have enough money saved to pay the full amount of my freelance taxes by the time April 17th rolls around. What standards does the IRS have for unpaid taxes? (Will I be hunted down at the very moment I cannot pay the full amount, or are they lenient as long as you pay a lot of the amount due, and then make monthly payments afterward?)


I answer: (1) Having a mix of W-2 forms and 1099s (in other words, taxes taken out of your checks and taxes not taken out of them) won’t mess up your tax return. This is my sitch almost every year, as some of my freelance clients pay me as a contractor, and it’s not a big deal. Considering a third of us are now freelancing and contracting full time, I can’t be the only one in this situation. But having a mix of year-end tax forms makes filing more complicated, which is why you should hire an accountant. Or make dang sure you know what you’re doing if you use TurboTax.

(2) I doubt you will be hunted down, killed, and cooked on a spit over a bonfire by the Feds the moment you don’t pay every last penny of income tax you owe, but the “interest” (the nice word the IRS uses for the penalties they hit you with) on late taxes is hefty. And if they do put you on a payment plan and you don’t pay up when they want you to, that’s when things can get nasty (words like “garnish” and “lien” can enter into play).

A good accountant can ensure you’re deducting the right amount of business expenses, which often can help reduce your freelance tax bill. You may not owe as much as you think, though it’s impossible for me to say without knowing your earnings or being an accountant myself. Get thee to a professional!

Entry Filed under: Ask the Cubicle Expat

5 Comments Add your own

  • 1. Dan Erwin  |  February 2nd, 2009 at 1:21 pm

    Twenty years ago when I had three daughters in college at the same time (gasp..), I got behind with IRS. One of my lawyer buddies, said “no problem.” Call them up the week before the tax is due, state your problem, but not in a whining way, and then, be sure to tell them when and how you can pay the tax.

    I did what he said, and lo and behold, the IRS did what he said they would do. Good learning experience for future negotiating.

  • 2. Al  |  February 2nd, 2009 at 1:27 pm

    You didn’t mention that Liz should have been paying quarterly the taxes for the freelance work. If she had done that, she might have had an idea about how much to have her employer withhold once she was employed in October, avoiding a huge tax bill come April 15.

  • 3. Michelle Goodman  |  February 2nd, 2009 at 1:29 pm

    Dan, thanks for the story. That’s good for others to hear. Twelve or thirteen years ago, I too had a tax bill I could not pay. I got on a monthly plan to pay the money I owed over the next year, and as long as I made each payment on time, the IRS left me alone. My accountant helped me with the necessary form, though I imagine it’s easy to find now on http://www.irs.gov.

  • 4. Michelle Goodman  |  February 2nd, 2009 at 1:40 pm

    Thanks, Al. Yes, I didn’t mention it because we’ve already covered that in earlier posts and Liz knew she was supposed to pay quarterly. But it never hurts to remind. So thanks for your comment.

  • 5. Liz  |  February 2nd, 2009 at 4:46 pm

    I’m in this same boat with the 1099′s and the w-2′s – luckily my dad is a tax preparer so i think ill be hiring him.

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Hi, my name's Michelle Goodman and I've been freelancing since 1992. I'm author of My So-Called Freelance Life and The Anti 9-to-5 Guide. Read my full bio here.

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