Ask MetaFilter questions tagged with Taxes

I Love Taxes

Anonymous — Fri, 11 Dec 2009 12:23:26 -0800

Tax question: How do I report money on a lawsuit settlement? Which tax form to use? I received a settlement of about 25,000 dollars this year. This was from a school I used to attend. Most of it was recouping tuition and living expenses. Some of it was for lawyers fees, and some for emotional damages. There were not a lot of punitive damages or anything. How do I report this? How much of this is taxable? Which form should I use?

I only had some small freelance income other than that this year, so I'm filling out a 1099. I would rather not pay to see an accountant, but will if necessary. Can I use turbo tax or something to get this figured out?

iPhone -- telecom tax

hilaryjade — Sat, 05 Dec 2009 06:54:09 -0800

My current iPhone was purchased in Washington. I live in Oregon. Under Government Fees & Taxes, I have a WA State Telecom Tax line. Is there a Telecom Tax for OR State? When I called the store after seeing this on my first bill, they said it was because the account was set up at a WA State store. Now we may be getting a new iPhone for Mr. hilaryjade, and I'm thinking, "Gee, let's get his account set up in OR, then transfer my line to his account..."

Do you have an iPhone and live in Oregon? Was your account set up in Oregon? If so, what are the line items and amounts on your statement in the Government Fees and Taxes section?

Thanks so much!

Who can I go to for tax advice for this unusual and embarrassing problem?

Anonymous — Fri, 04 Dec 2009 10:35:06 -0800

Who can I go to for tax advice for this unusual, personal and embarrassing problem? OK... I've been mostly unemployed for the past few years, working sporadically for self-support (I'm OK for now).

My parents don't know this, and believe I've been holding down a 20-30 hour a week job, and I absolutely prefer it to stay that way for now.

My problem: The family shares income from various stock and bond holdings (S Corp), and the parents would like me to run some numbers through TurboTax and last year's taxes to help figure out my "effective capital gains rate" for the coming year . OK. I can't do that; any capital gains rate estimate would reveal (I would think) my unemployed status and very, very low income. What I need is some kind of typical numbers for the kind of job they believe I have that I could feed into turbo tax to create a viable effective capital gains rate estimate.

I'm not financially savvy, unlike my parents who have worked all their lives in the financial world. Would somebody at, say HR Block be able - or even willing - to help with this problem, and what would I be expected to be charged for it? Basically, I'm just trying to hold onto my private status as unemployed for the moment; I'm not trying to defraud anyone or do anything illegal, and when I file my taxes in the spring, I will (as always) use only my true numbers.

What to do?

i am at a loss.

radiosilents — Wed, 02 Dec 2009 14:53:16 -0800

huge payroll issue. i'm lost and need direction. long story follows, but the short version is that i seem to have been overpaid by $15,000 and now my employer would like that money back. between november 2008 and june 2009 i seem to have been overpaid a grand total of just under $15,000 by my company. they seem to have not noticed this until a couple of weeks ago, and i have very recently received a letter detailing how they will be garnishing 20% of my wages per paycheck until this matter is resolved (which will take 44 pay cycles, or nearly two years).

there are two pieces of payroll software in play here, which we will refer to as the frontend software (which i have access to) and the backend software (which i do not). these are not different facets of the same piece of software, they are actually two wholly seperate systems which pass information back and forth.

we submit time on a weekly basis, and are paid every two weeks. we are paid in advance of time worked (something i will go into more detail about later).

all of my time was reported correctly on the front end.

the backend seems to have wholly ignored the time i reported and simply assumed things which were not true about my schedule.

in this particular case, i was working a 4x10 schedule (4 ten hour days a week) with my three days off all being weekdays. during the problem weeks, the backend system assumed that i must've worked 8 hours on each of the weekdays that i had off, and recorded that time for me as if i had been working. since i already had a full 40 hours reported, it counted all 24 hours as OT along the way.

the backend software is supposed to auto-generate an email to my supervisor requiring manual approval for any pay period that contains overtime.

the backend system recorded that OT for me on 28 seperate weeks, but only generated and sent that email on two of those weeks. on those two weeks, my manager went in and manually corrected my time on the backend and my pacheck was, as a result, as it should be.

on the remaining 26 weeks payroll paid me for those phantom 24 OT hours.

i recognize that an obvious question is "how did you not notice this was happening?" and the answer to that is just that we were specifically told by management when we were hired that even when working a standard set of hours week after week, we could expect to see fluctuations in our paychecks and that this was perfectly normal and that payroll had a complicated system but they were on top of things. sadly, i trusted them.

we sumbit time well before the close of the work week (submission of your anticipated time is due on tuesday, the work week ends on saturday) for the time we anticipate we will be working/on vacation/etc. payroll records hours and cuts the paycheck before that pay cycle is completed, and then on the subsequent paycheck corrects anything that changed after your time was submitted via a "prior period adjustment".

(side note, an example for illustrative purposes - way back when i was hired, it was just a couple of days before the end of a pay cycle and i was paid for a full two weeks of work despite having been employed by the company for only a handful of days. on the next paycheck, i was paid a much smaller amount of money to correct the previous "overpayment", and then on the third and subsequent paycheck things equalized and started paying out more-or-less "properly").

this can lead to some situations where corrections are reflected on your paycheck weeks after you correct your previously-reported time in the system.

(if you have a sick day after your time for the second week in the pay cycle is submitted, you can go back and correct your submitted time once the next pay period starts, and then on the pay period after that there will be a "prior period adjustment" which corrects whatever needs to be corrected at the end of the next pay cycle. as a result, corrections can often take up to three weeks to actually take effect.)

when payroll finally realized what had been happening, they communicated this to my manager (who then communicated it to me). my manager and i went back to my paper copies of all of my paystubs to try and sort out exactly what had happened, and then we came to the sad realization that the "prior period adjustments" seem to have been made with no sense of continuity or standardization.

as a single example, on one pay stub in the middle of all of this i see i was given money back in a category ("differential") which doesn't appear on any other paycheck. it is not an applicable pay category for me, nor was money ever taken out of that pay category.

after having looked over all of the paystubs from the months in question, i realized that there were far more categories than i had anticipated seeing and so i made a spreadsheet with as much data as i could glean. all of the following categories appear somewhere in the stack, some often and some rarely and a couple of them even have unique instances.

basic wages
overtime wages
overtime premium
holiday
vacation
excused day
short sickness
pay adjustment
OT adjustment
differential

in some cases i see money both being added and subtracted in the same category as a "prior period adjustment" on a single pay stub. in other cases, i see dollar amounts seemingly move between categories over time (i.e., a particular amount added as a "prior period adjustment" in a particular category on one paycheck, and seemingly that exact same dollar amount removed as a "prior period adjustment" from an entirely different category on a subsequent paycheck).

the "prior period adjustments" also do not note the date for which prior period they are adjusting on my paystub. payroll, it seems, can view this data on the backend but there are no tools available to me to view this information.

earlier this week payroll sent me a letter which states that for the next 44 pay cycles, i will have a charge of $330ish (20% of my gross pay) removed from my paycheck to account for the OT, the OT premium, some vacation, and some regular pay - all of which they claim were overpaid to me during the course of the year. they would like me to sign this letter, have my manager sign this letter, and then return the letter to them. at that point, they will begin to begin to deduct the listed amount from each paycheck.

by the way, this letter is the first communication payroll has had directly with me about anything in this whole mess.

i attempted to get more information from payroll and i was sent a very sparce spreadsheet with an incomplete legend and no explanation for the data on it. i'm assuming i don't know what i'm supposed to be asking for from them.

my manager said to me that payroll had mentioned to her that i would need to file a tax adjustment for the previous year, and then most likely again for the current year after this whole thing gets sorted. i don't understand exactly what that means.

do i need to consult a CPA? a lawyer? what questions do i need to ask of payroll? what data should i be seeking from them? i don't even know if i'm asking the right questions.

i live in oklahoma (near tulsa), if that's relevant.

please help guide me. i can survive on 80% pay for the next two years, but it's going to be awfully tight living and all of my plans to save money are completely shot.

throwaway email, if it's helpful : payrollwoes@gmail.com

Tax deduction shuffle

jimmy0x52 — Tue, 01 Dec 2009 14:50:34 -0800

Can I buy a gift card this year (2009) for purchasing a computer in the following year (2010) so I can take the tax deduction in the current year (2009)? I need a large deduction to offset income for my business in 2009. I'd like to buy a new computer but I know the newer, better model is coming out in January of 2010.

Question is: can I buy a giftcard for said retailer in 2009 so I can take a tax deduction in 2009 on it and use the giftcard to purchase the computer in 2010?

It seems frivolous to buy the computer in 2009 when I know the release of the new one is so close away - it's like throwing away money.

I also don't know if that's legally acceptable in the IRS's eyes.

Need help figuring how much to put aside...

InterestedInKnowing — Mon, 23 Nov 2009 20:57:14 -0800

I need to know a rough estimate of how much I should take out in taxes. Theres no withholding with my checks because the temp agency is whack like that. But I need to know how much to take out for tax season? I live in NY, but don't live in the city. So far I earned with this agency... 7466.55. The end of the year it will be $9000 earned. Can anyone help?

Finally! $100 in Adsense!

47triple2 — Mon, 09 Nov 2009 06:44:32 -0800

I broke the $100 mark on Adsense, now what? I've been blogging with Adsense for more than a year and finally broke $100 mark. Do I have to do anything now or are they just going to send me a check at the end of the month?

I've been planning to stop blogging once I broke that magical number, will this cause problems with not getting paid? (My blog will still be there for a couple months, but there will be no new content.)

Does this affect my taxes? (Is it a very small, one time, "gift.")

Finally, what am I actually going to get out of that $100?

Thanks!

Do I need a business license?

jefeweiss — Fri, 06 Nov 2009 07:31:10 -0800

Last year I got most of my income for working from home in the state of Virginia. I did work for a company that is not owned by me and was located in another town in Virginia. I got a 1099 as an individual from the company for the work that I did. This work was all conducted by phone and email, no one came to my home. I recently got a letter in the mail from the City of Winchester, VA saying that I did not register as a business in the city and that I needed to pay back licensing fees. I know you're not my lawyer, but do I have to do this?

How to invest $30k for 3 months?

trbrts — Wed, 04 Nov 2009 07:09:12 -0800

What are some good low risk ways to invest $30k for about a 3 month period? So, our house is under contract, but, so far we've been unable to find a house that's meeting our requirements. At this point I feel that we aren't going to see anything good until after the holidays. So, we're probably going to switch over to looking for a rental. Rather than just sticking the money in the savings account, I'm open to taking some of it and seeing if we can get some kind of return, but, I don't know anything about investing. So, what are some ways I can invest around $30k for around a 3 month time frame that will see some kind of return. Obviously I can't get too crazy with this money and I understand that 3 months is a pretty short timeframe. Would there be any tax implications in doing this? Thanks in advance.

Forgot to file tax returns. Now what?

doomtop — Mon, 26 Oct 2009 09:27:00 -0800

Forgot to file tax returns. Now what? I filed extensions back in April to get an extra six months to file. (I have to file in two states and one federal return.)

I guess I expected to receive something back, but never did. I got lazy and here I am, a little more than six months later and I haven't filed.

I did do the taxes and get an estimate on what I owed and sent that payment to avoid interest, etc. But there were some forms and things I needed at the time which is why I filed for extensions.

What's going to happen now? Should I just send them in late and hope for the best? Or is there something specific I should be doing?

I haven't heard anything from the IRS about it...

Help! Tax Deadline Tonight!

SallyHitMeOntheHead — Thu, 15 Oct 2009 16:46:16 -0800

HELP! It's tax day. Tax return due tonight. HELP! My 2008 filing deadline is tonight. I have paid 2008 tax in full, on time (i.e., April 15 2009). But I got an automatic extension to file, and filing deadline is just over 4 hours away. I can crank the thing out, but I'd rather not. My question concerns the penalty. Repeat: I paid full tax due on April 15.

QUESTION: How much is my penalty if I file next week?

I got pwnd.

Tu13es — Tue, 13 Oct 2009 17:24:50 -0800

When I bought my car from out of state, the dealer never collected sales tax. Now I moved to that state and the state wants to collect! Help! In August 2008, I purchased a car from a dealer in MA. I was a NH resident at the time. I was under the impression that, being a NH resident, I was not obligated to pay MA sales tax (we don't have sales tax in NH). I picked up the car at the dealership and drove it home.

Fast forward to last week. I recently moved to MA and went to the RMV to get my MA plates. Prior to my visit, I had asked the dealer for a letter saying I was from out of state when I purchased my car, and that I was exempt from paying sales tax. The dealer sent me a notarized Letter of Delivery. I handed in all the forms, and the clerk at the RMV stated that the exemption form needed the salesman's home address, since he delivered the car. I (stupidly?) told her that I picked up the car at the dealership, and that it wasn't delivered to my house. The clerk went and talked to at least one supervisor, as well as someone from the Department of Revenue. They all confirmed that, since I picked the car up in MA, I owed sales tax. (If I had let the dealership deliver the car to me, I would not owe sales tax.) She also confirmed that the dealer should have collected sales tax when I purchased the car. She gave me a printout showing the sales tax that I owe (about $1600) and also the penalty (another $500 or so) for not paying the sales tax when I purchased it.

I called the Finance Manager at the dealership and was basically like "WTF?" She told me I should try and go to another clerk at the RMV, or to another RMV office, and not tell them that I picked the car up in MA. (Apparently the dealer was basically pretending that they delivered the car so that I wouldn't have sales tax. Except they didn't let me in on this little secret. Fun.) I told her that that wouldn't work, as the RMV had documented my case and the clerk had also mentioned that it was possible tax evasion by the dealer. The finance manager basically said "Oh, that isn't good. Well, good luck with all that." and left it at that.

I realize I owe the sales tax to the state and there's nothing that can get me out of that. Of course, if I had known I'd be out $1600 for picking the car up at the dealer, I would have had them deliver it. But since the dealer never told me about the fact that picking it up would force me to owe sales tax, and because they never collected it, I'm now out $2100.

What can/should I do? I realize I can probably call the BBB and Consumer Protection, but is there anything I can do that will help offset the money I owe? I realize YANML, but should I consult with one? Should I just suck it up and pay the $2100 and move on with my life?

Here are some links to save you some time digging for them:

Converting an Out-of-State Registration
Form MVU_29, Affidavit in Support of a claim for Exemption from Sales Use Tax for a Motor Vehicle Purchased Outside of Massachusetts

Is there a threshold for self-employment taxes?

Anonymous — Tue, 06 Oct 2009 15:01:46 -0800

I'm earning maybe $4,000 this year, of which $2,000 is as self-employed. Do I still have to pay around $300 in taxes? I'm wondering about the taxes for self-employment (I'm a U.S. citizen). I'm on track to make maybe $4,000 this year total, I expect to receive $2,000 of that total in the near future for work I did while self-employed.

While the funds will be transferred to my bank account in the country where I am currently located, I was looking at the tax forms and was surprised. Not only are there the "normal" taxes on the 1040 (which may amount to zero this year), but regardless of my total income, I still pay a bit under 15% (around $300, calculated from the $2000) for self-employment taxes above and beyond any other taxes. This would be quite a hit for me -- can anybody please offer some guidance? Is there any respite for self-employed people with a very low income?

Hit the 401k to start a business?

wezelboy — Thu, 01 Oct 2009 15:17:02 -0800

I'm thinking about cashing out my 401k to help start a business. I know I will pay a penalty, and that what I take out will be taxable income, but I expect my business to post a loss the first year that would offset most of (if not all) of this income. Would I still have to pay taxes on all of the 401k money? The business I am planning will take a while to get going, and I expect a significant loss the first year- probably more than I take out of the 401k.
I'm also wondering if rolling over into an IRA and then pulling the money out might mitigate some of the penalty and/or taxes.

Do you have to pay taxes on money paid during a seller rent-back?

unclezeb — Tue, 29 Sep 2009 21:31:20 -0800

You buy a house in California. You agree that the seller can stay up to 2 months after escrow closes (a "seller rent-back") if they make your (PITI) payments. Do you need to pay income taxes on the money they pay toward your PITI? Also, what was your "seller rent-back" experience? We are buying a house in California. The sellers (who are very nice) want the option to rent the house beyond closing while they look for a house to buy (e.g., a seller rent-back or Residential Lease After Sale [RLAS] agreement) for up to 2 months. If they stay beyond escrow, they will pay our PITI, say $100/day for the sake of convenient calculations.

Suppose they stay 20 days and pay $2000 toward our PITI during that time.

Is that $2000 considered our income for tax purposes? In other words, would we (in the 25% federal and 9% state tax brackets) need to pay taxes on that $2000, effectively reducing it by one-third?

I understand we can deduct our interest and mortgage insurance payments from our taxes, does that mean this comes out in the wash?

What was your experience with a "rent-back" or a Residential Lease After Sale agreement?

Are the taxes on an American sweepstakes win by a Canadian worth our while?

stungeye — Fri, 25 Sep 2009 08:28:22 -0800

SweepstakesFilter: My wife (a Canadian like myself) recently won a large number of travel rewards points from an American chain of hotels. Help us determine if the prize is worth keeping considering what we'll have to pay in taxes to the IRS. We have confirmed the legitimacy of the prize. (The contest was handled by ePrize and we've been in direct communication with a rep from the hotel chain.) To redeem the prize we have been asked to fill out an IRS W8BEN Foreign Status form. The instructions for the form state that "Foreign persons are subject to U.S. tax at a 30% rate on income they receive from U.S." Unlike casino winnings (for which the 30% tax can be recouped by a Canadian winner) I cannot find any information on the foreign tax liability for points-based sweepstakes.

When asked about taxes, a representative from hotel chain said the following:

"Although I cannot provide you with tax advice, it is likely that your tax liability will not be based on the published retail value of the points, but instead based on internal costs to provide the points."

The published retail value of the points was $35,000 and we've been told that the internal cost will be around $15,000. The points can be cashed in for approximately 12 round-trip overseas flights, or (for the sake of monetary comparison) converted into $10,000 worth of Amazon gift-cards.

So here are my questions:

Have you been in a similar situation? Care to share your "Canadian winner of US sweepstakes" taxation experience?

Can you suggest a firm to contact that will know how to deal with this situation? (So far the Canadian tax advisers we've contacted haven't been overly helpful.)

Should we accept the prize, even if it means paying $4,500 to $10,500 USD? (The former being tax on internal costs, the later being tax on the retail value of the points.)

If we accept the points and are surprised with a giant tax bill (say the full $10,500) can we return the prize to avoid the taxation?

My company gave me too many paychecks...

tickettrader — Sat, 12 Sep 2009 06:31:47 -0800

My wife was working a temp/contract job earlier this year. Her contract ended in May and she was paid her final paycheck but was still owed about 60 hours of PTO. Two weeks later, a check came that was similar, but a little less than her usual paychecks. We just assumed it was her PTO payoff. Two weeks later, another check came in the same amount. The same day, my wife called into the company payroll and her supervisor to explain the situation. They both assured her that it had been taken care of. Two weeks later, another check came......and then another....and she called in again...and then another in early July which seemed to be the PTO amount.

Obviously it's not our money but I'm not going to pay it back until they fix their system and prove to me that our tax information is corrected.

Has anyone else had a similar situation? What was the end result?

Does freelancing count as a second job as far as taxes go? (CA)

mallow005 — Thu, 10 Sep 2009 00:25:13 -0800

Sometimes I get small job requests that come from outside my fulltime job. They don't pay much (barely over 1k this year) but it's enough to require me to report myself as a business. Does that mean it's a second job?

I'm looking for a good accountant for freelancers (and families) in the Philadelphia area

Deathalicious — Tue, 08 Sep 2009 07:06:58 -0800

I'm looking for a good accountant in the Philadelphia area. Ideally one that can help with both tax issues for a freelancer in the tech industry, as well as more general family accounting (I just got married and we just opened our joint account). Any recommendations? I reside within Philly city limits and I work from home, so I'd prefer someone familiar with Philadelphia tax issues (I have no idea what I owe the city) and with the particular needs of and deductions for freelancers in the tech industry.

I like building long term relationships, so I'd like to find someone who can help with all the other stuff that's going to come up in the next few years: children and raising a family, buying a house, saving for our potential kids' education, and retirement.

Also, if I want to figure out things like budgeting and getting on sound financial footing, is that something I would talk about with my accountant or is that someone else?

Appealing a Property Tax Assessment - need advice in King County WA

Anonymous — Tue, 01 Sep 2009 19:45:20 -0800

Property Tax filter: In August I bought a house in King County WA. The county's assessment of the property is very high. I would like to appeal for a review of the assessment. The desired result is a lower tax bill. I would be grateful for any strategy or advice. Details:
- The house is in the City of Shoreline, WA (north of Seattle).

- The August 2009 sale price of the property was over $200k less than the 2009 assessed value, and $40k less than the 2010 assessed value.

- The bank's appraisal, done prior to sale, estimated the value as just slightly higher than the actual sale price.

- House and yard are in good clean condition.

- The County's "parcel viewer" assessor information database states that the house has 4 bathrooms. Not true. It has 2 full baths, 1 half bath, and 1 water closet without sink. There is also a "roughed in" bathroom without any fixtures.

- The assessor database states that we have half a finished basement. Not really true. The basement has four small rooms. Three rooms are unfinished with concrete floors and no finishing over the wall and ceiling framework. The fourth room has ancient carpeting, a couple sheets of old wood paneling, one wall covered in old wallboard, no finish on the ceiling.

QUESTIONS:

If I understand it right, I can appeal either to the King County Dept of Assessments or to the Board of Equalization . Which one is likely to give me better results?

Apparently I just missed a July 31st deadline for 2010 appeals with the board of equalization. Is there any lee-way for me to get an appeal in, since I didn't own the house until August?

Would it help my appeal to remove the old carpet in the basement and expose the concrete floor? Should I take down the wood paneling?

Is there an easy way to measure the square footage of my house?

Any other tips on get them to re-evaluate in my favor? Is there a way to get it done quickly? TIA.

Taxes/licenses required for Nevada company providing consulting services in California?

Jacqueline — Fri, 14 Aug 2009 16:16:38 -0800

Taxes/licenses required for Nevada company providing consulting services in California? My friend has a small business incorporated as an LLC in Nevada. This business manufactures and sells scientific instrumentation.

Another company/organization is going to pay his business for him to travel to their site in California to demonstrate the instrumentation. They're not buying or leasing the instrumentation (yet), they're just paying for the use of it with the accompanying services of the operator (him).

What State of California taxes or business license requirements apply here? Should we also investigate county or city requirements for this sort of thing?

(I don't even know which California government office to call to ask!)

Thanks!

Withholding for overseas commision earners

Dag Maggot — Wed, 12 Aug 2009 17:30:03 -0800

We're starting a US based online T-shirt company that pays sales commisions to designers. In the event that the designer is overseas, do we need to withhold tax? If not, what IRS form do we/they need to fill out?

How Do I Get Paid For My Podcast?

HostBryan — Tue, 11 Aug 2009 07:02:25 -0800

How should I go about monetizing my podcast in a legitimate and professional manner? I've been operating my podcast for over three years now. In that three years, I've made a lot of new friends, met and interviewed some of my personal heroes, and just generally had a good time. We've since gone from just one main podcast to a soft launch of a network of podcasts on various topics, which I am pretty excited about.

Unfortunately, I've never really gotten anything in terms of financial compensation, which means I've been running it at a loss for three years. Now, it is not a gigantic expense and I am otherwise employed, but I'd like to make the podcast make at least a little money. I'm not looking to get rich, but if I could cover server and domain costs, give my co-hosts a little something, and maybe cover a few other bills I'd be ecstatic.

I've got some experience with radio sales but podcasts are a whole different beast, especially because it seems like I pretty much have to set up my own operation. I don't mind going hat-in-hand to potential sponsors but I also don't want to look like some shady character who's just going to take the money and run.

I plan on offering recorded ad messages and on-air mentions of the product/website/whatever, as well as banner and link space on the front page of the actual website. I'm mostly looking for cash, but trades of products or services for giveaways/reviews/whatever are also welcome.

So I guess I have a couple questions.

1. How do I go about making everything nice and legal and official? I want to make sure there's a paper trail and documents for sponsors to follow, also I want to be sure how to file taxes for this sort of thing. Plus, I don't want to look schlubby.

2. What would be a fair ballpark rate to charge for podcast advertising? We aren't a huge podcast but we get a large number of downloads for each episode, and we've been having a lot of luck with landing relatively big-name guests lately. I'm thinking of offering a tiered structure - sort of a Bronze/Silver/Gold/Platinum-type thing.

3. Would I instead be better off just accepting donations?

Thanks for your help, hive mind.

New to contracting in Australia and need some payroll/tax advice!

Flying Squirrel — Wed, 05 Aug 2009 19:39:58 -0800

New to contracting, and new to Australia. Can someone please help me find a company to sort out my insurances and payroll (and the 'living away from home allowance' -- or recommend an accountant if I need one? I am living in Melbourne, Australia on a working holiday visa. I am currently working a 3 month contract (intranet development) for a healthcare insurance company. I got hired through a recruitment agency. I have never worked as a contractor before.

The recruitment agency will pay me a daily rate but I need to have all the workplace insurances and payroll sorted out. They recommended Ayers Management, who they normally work through. Ayers works by taking 3.5% of your pay, and that covers their 'service fee' -- they pay you and take care of all the workplace insurances you need.

I also have the option of setting up my own company but I believe this will be expensive and complicated. I don't know if I will work as a contractor again after this job.

I kept asking Ayers for a breakdown of what taxes I needed to pay as I do not know much about the income tax rates, superannuation, etc. They took a long time giving me a breakdown, and thought I would be eligible for the 'living away from home allowance' (I'm Canadian.) After they determined I was eligible for this, they gave me a breakdown. According to their calculations, the LAFHA will give me more take-home pay. This seems great, except if I use the LAFHA, they jack up their 'service fee' to 7.5%. It still means slightly more take-home pay for me, but I was irritated by this.

I have also began looking at other similar companies (I don't even know what to call them...payroll management companies??) such as Geoffrey Nathan, and Free Spirit, who seem to be more tailored to people who can claim the LAFHA.

But when I get a 'quote' they all have vastly differing income tax, superannuation, and 'service fee' deductions. I don't want to be in a situation where I end up paying tax at the end of the year.

I'm wondering if I should talk to an accountant because I can't get my head around all the payroll deductions and taxes I need to pay, and I don't understand why these companies keep quoting me different tax rates.

Can anyone point me in the right direction or recommend a good accountant I could talk to for advice? (I'm working in Hawthorn, Melbourne)

Sorry if this is confusing, I really am lost. Let me know if more information would be helpful!

Fellowship Finance

Aanidaani — Fri, 31 Jul 2009 07:52:04 -0800

I recently started graduate school supported by a National Science Foundation IGERT Fellowship and I just received my first paycheck--without any taxes taken out of it. Am I exempt from paying tax (state and federal) on my fellowship stipend because it's from the government? I claimed two allowances on my W-4 and I don't think I would be subject to witholding because my income is so low. Another fellow's tax accountant said the fellowship was exempt, but I'd like another opinion. I want to be sure that I'm not going to get stuck with a large bill next April that I'm unprepared for. Thanks!