As a contractor, do my taxes depend on where my payments get sent?

December 31, 2014 2:52 PM

You are not my accountant. I am a 1099 contractor that works for a consulting company. I am meeting with my accountant next week to form an LLC for 2015. I will be getting paid for the month of December at around the same time. I will open a separate bank account for the corporation, but I will not be able to do it in time to have my first 2015 payment deposited into it, so it will get sent to my personal bank account as it does now. Will this cause any problems in 2016 when I'm doing my 2015 taxes? Or does it not really matter?

My original plan was to open a separate bank account before forming the corporation, but a business account seems to require an EIN. Is a business account even required?

posted by alligatorman to Work & Money (5 answers total)

Having a separate bank account to go along with your EIN and LLC is going to make all future taxes and accounting much easier, especially since it will effectively create a wall between your personal and business finances.

I set up an LLC in the past, in the middle of a year, and a S-corp later on, at the beginning of a year. It just meant I had to pull up some personal bank account info for the first part of the year my LLC wasn't set up yet, but after that it was really smooth and much easier on everyone to track money.
posted by mathowie at 3:15 PM on December 31, 2014

If you can afford it, just ask the consulting company to defer payment until you have the LLC set up.

I don't believe your question was about where, geographically, you pay taxes, but just in case: Where you pay taxes (ie., which state) would depend on where you actually were working, not your residence, not where the consulting company is located, not even where your LLC happens to live. There are lots of different rules in different states, but in general, you would file first in the state where you were working, then in the state where you live, and you will probably get some credits in your home state for any taxes paid to the state where you were working.
posted by beagle at 3:16 PM on December 31, 2014

Depending on the exact details and your accounting method, that payment for December might properly be accounted for in 2014 taxes, and then you can avoid the question altogether.
posted by ktkt at 3:42 PM on December 31, 2014

Are you electing to have the LLC treated as a corporation (S or C corp)? Or doing the default of disregarded entity? Either way, it should have minimal tax impact unless the amount constitutes a significant portion of your 2015 revenue.
posted by melissasaurus at 12:13 AM on January 1, 2015

Is a business account even required?

Not for tax purposes, but if you want any hope of maintaining the liability shield of an LLC, you cannot commingle personal and business funds.
posted by melissasaurus at 12:16 AM on January 1, 2015