Show Me The Money

October 20, 2010 9:50 AM

I work full time in the US. A European company wants to hire me as a consultant on a contract basis. How can I minimize my tax burden?

I have a small LLC that I formed a few years ago to do technical services and website design. This company has been somewhat dormant (although with about $1500 income this year). The work I will be doing for this new company is less technical services and more business development. I'm not sure it fits into the original charter of the company.

I stand to make between 10 and 25k over the next 1-2 years with this European company. I currently have a very high tax burden with my full time job. How can I structure this so that I can minimize the income tax?

posted by anonymous to work & money (4 answers total)

It might help to know what state you are in, but anyway. You can open a SEP IRA to contribute a portion of your self employment funds to (the exact limit is something like 18% of your self-employment income, I forget the details). This allows you to contribute additional funds to a tax-deferred retirement account in addition to the 16.5k allowed annually in your 401(k) that I assume you have at your day job.

Don't forget that some of the self-employment tax goes away above a certain annual income level, so hopefully the taxation won't be too terrible. And remember to increase your day job withholdings or make estimated tax payments, or otherwise you may be hit with late payment penalties from the IRS, which will increase your effective tax burden.
posted by phoenixy at 9:59 AM on October 20, 2010

Look, you're talking about international tax issues on top of self-employment tax issues. There are so many different ways this can bite you in the ass that I'm not even going to bother trying to point you in the right direction. The only possible correct answer is get an accountant, if not a lawyer.
posted by valkyryn at 10:23 AM on October 20, 2010 [2 favorites]

WOW do you need to talk to a tax attorney. He or she will charge more than Metafilter will, but it will be worth it.
posted by foursentences at 10:32 AM on October 20, 2010

Aren't they just paying your invoices like any other company that hires your services?
posted by sagwalla at 1:09 PM on October 20, 2010