From Alan: “When hiring authors at Elance or Rentacoder, do I need to worry about a 1099 or anything for them? ”

Good question. The simplest answer is “It depends.”

Probably the two biggest providers of content writers that I know of (and use) are Elance and Rentacoder. After digging into their help sections, it can be discovered that they have two different policies when it comes to 1099-MISC filing. (more…)

From Dean: “If I don’t make a profit do I still have to pay Self employment tax? Federal or State?”

I’m assuming your talking about operating as a sole proprietorship, as that’s the structure that requires the dreaded Self Employment tax.

The short answer is “no,” you shouldn’t have any tax to pay. For your business structure, you should be filing Schedule C for Form 1040. For the 2005 version of this form, line 31 states:

If a profit, enter on Form 1040, line 12, and also on Schedule SE, line 2 (statutory employees, see page C-6). Estates and trusts, enter on Form 1041, line 3.

If you don’t have a profit, then according to IRS documentation, then you shouldn’t need to file Schedule SE for Form 1040 which determines the amount of self employment tax you owe. Even if you did file Schedule SE with no profit, if you run your numbers correctly you’ll calculate no tax is needed to be paid.

These are references to the federal forms, so your states forms may be slightly different.