I subscribe to your newsletter and I was wondering if you could help me sort things out.

I'm currently working as a 1099 employee for a major financial institution. In order to start working as a 1099 consultant, I had to form a corporation, get business liability insurance as well as workman's compensation insurance, so I did (an S corp. in New York State).

Before, when I was working as a W2 employee, I was getting my paycheck direct deposited into my personal savings account. And even though I don't know much about taxes, I know that now that I'm 1099, it's not good for them to deposit my pay into a PERSONAL account.

My question is, should I set up an account with a PEO (like ADP, Paychex or TriNet) and have them pay me like an employee of my corporation OR would something like OneCore be best OR is there another option that I should be considering that are better for my needs?

The details are:

* I'm single
* Childless
* Renter (who will be buying next year)
* Earning $75.6K/yr.
* 28 years-old

All the accountants I talk to are like $225/hr. and I don't know if my needs require someone "that" upscale, if you know what I mean.

Also, based on you professional opinion, should I have chosen another corporate form?

Please help, my first 1099 payment comes on 9/29 and I need to have a solution in place by then.

Thank you so very much in advance.

Sue

First of all, I'd have formed an S-Corp. If you have just formed the corporation, you have until the 15th of the third month after formation to file the S-Corp decision - Form 2553. (Please remember to file your state's equivalent - many people, even professionals, often overlook that.)

This will let you look like corporation, act like a partnership and pay taxes without incurring the self-employment taxes of a partnership or Schedule C (or even an LLC).

Set up a payroll for $1500 per month, via the payroll service of your choice [ADP, Paychex (preferred) etc] and have them take care of the payroll payments, and filings. Take the rest of the income from the S-Corp as dividends.

You don't need to pay $225 per hour for tax help. Consider talking to EAs (Enrolled Agents) in your area.

They often charge less than CPAs. You can work with many of us online and across the country. So find someone who is referred by someone you know with a similar business. (See TaxMama's Hiring A Tax Pro).

If you haven't set up your corporation yet, you can have Dottie do it in days. But you will have to the S-Corp filing yourself ... and remember to file with your state. Cost, about $350 + filing fees

Then, meet with your tax pro to set up the S-Corp and work through the day-to-day details of the care and maintenance of your own baby corporation.

Best wishes,
Your TaxMama

There is no guarantee that we'll have room for all your questions, so we try to address those issues that will help the most people. 

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Updated September 29, 2000

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