Even Steven

Second meeting with the tax people today. Go by and pick up the forms, Federal, State, Local, and another Local. Turns out the way it works here is that I have to actually physically take myself down to the borough office and have them verify that I in fact paid taxes to the borough before the City of Pittsburgh will believe me enough that they wouldn't expect to get paid.

It seems like the way it works is that Pittsburgh taxes everything you don't pay taxes on in another jurisdiction. What if your home jurisdiction doesn't have a city tax? Do they just get that as a bonus? Something a bit out of whack there I think.

Still, things worked out pretty well. Refunds from all jurisdictions. So at the end of the year I was a little ahead of the game.

Then we opened the other envelope. Those of you that work freelance may have also had this particular experience. The wonder of the 1099, the total lack of withholding, the opportunity to take deductions dollar for dollar, and the 500 pound gorilla: self-employment tax.

Its a sad truth that at the end of the year many theatrical freelancers wind up owing a bunch of money because of self employment tax due to the fact that the hiring organizations have tried to save a few bucks by paying 1099 rather than W-2. The other day I spent a good chunk of time reading IRS documentation to verify whether or not my intended really ought to be paid that way. It turns out her gig is grey enough that a case can be made either way.

Most of the time it is blindingly clear that when a theatre hires a freelance technician and pays them 1099 that they aren't doing it legally. In most cases if reviewed by the IRS these people would turn out to be employees, not independent contractors. Really the tax dimension isn't nearly as important as the workmen's comp dimension.

A rant for another day.

So adding the self employment liability to my credit and at the end of the year it comes up even Steven. Which I guess isn't the worst possible outcome. Still would be nice to have that free money.

I was talking to the accountant and relating how for years I had gotten much larger refunds and that I remember somewhere along the way they reduced the withholding levels and the refunds went down. Its not like the money went away, they just decided it would be better for us to hold it than for the government. At the time I remember hearing that the reason was so that people would have more money in their pocket to spend. Today the accountant said it was every bit as much that when the refunds came due the government often didn't have the money to pay out. So they changed the policy so they wouldn't wind up having debt to taxpayers they couldn't cover. That's an interesting spin.

So, no windfall for us this year. And the moral of the story is: "Beware the 1099!"