tax-treatment of second "job"

[Guest anarchocap]

I have a primary job, which is my normal 8-5 job 5 days of the week. Now, I've talked with an editor of a computer journal, and am going to be writing articles for her journal, at $125 a page. I come up with some ideas of what to write about, and talk with it with the editor, then we decide if it's something that would make a good article. I can submit whatever I like (I'm not an official employee, I just submit articles), but the editor obviously can choose to only accept those that she feels are appropriate for the journal (thus it is prudent to talk with her before engaging on a venture). After articles have been accepted, I get a check from her business account.

So, my question is, given that information, what is the tax-treatment of all of this? Because of this separate source of income, are there any additional retirement plan options that are open to me (I currently have a 403b and a RothIRA)?

Thanks for any responses.

[No Name]

The is a 20 point IRS guideline to determine whether or not you are an independent contractor.

Sounds to me like you are, but you've got to look it over for yourself. If you are an independent contractor, any of the various retirement plans discussed on these boards are available.

A consideration of what type of plan to establish would be what, if anything, your 9 to 5 employer provides.

[E as in ERISA]

See information on self-employed persons, sole proprietors, etc. in

http://www.irs.gov/pub/irs-pdf/p560.pdf

[dh003i]

thanks for the information; I've looked around a little bit. I've read a little bit about self-incorporation. Does anyone have any links on that, and when it would be a good time to do that? It seems like I can get some favorable tax-treatment by doing that.

PS: I'm the same person as anarchocap. For some reason, I made another account, and was automatically signed into that account from my computer when posting the original comment.

[david rigby]

You might need some legal advice, although perhaps not generating enough income to justify significant fees. Your state Bar Association (or state Bar, which is different) may have some free pamphlets that will give you some highlights of issues applicable to incorporation. Perhaps on a website.

[mbozek]

Incorporation involves time and expense and could subject you to additional taxation by both fed and states and require that you hire an accountant to do your taxes. NJ, for example taxes S Corp owners at 2% higher rate than individuals. You can set up an HR-10 plan or SEP as a self employed person and contribute 20% of your net earnings without incorporating. Or you can establish a SIMPLE plan and contribute up to 9k.

From the facts presented you will be a independent contractor if you can work for more than one co, dont have regular hours and get paid only for articles that are accepted. You will receive a 1099 misc for your payments and you will be required to pay FICA and income tax on the amounts. You should be concerned with whether you will retain the copyright to the materials that are accepted for publication.

[dh003i]

mbozek,

Thanks for the information. Obviously, from what you said, incorporation isn't worth it. Regarding my status as an independent contractor, I will be able to write for other journals, but I don't plan on doing such (writing two 6-page articles per month will probably be as much as I can do, and that's not enough to submit to multiple journals). Thanks for the copyright suggestion; I'll have to ask the editor about that. I've looked into the possible retirement plans, and it looks like a SEP is my best option, because it allows me to contribute more net money to retirement.

I talked with a Fidelity rep, and he said that if I do a SIMPLE, the amount of my contribution to the SIMPLE plus the amoutn of my contribution to my current 403(b) can't exceed $13k a year. However, if I do a SEP, I can contribute 25% of my income as an independent contractor, and that will stack on top of a $13k 403(b) and $4k Roth IRA contribution. I then also have the nice option to roll the SEP over into a Roth IRA, allowing tax-free growth.