self employed as a free lance pilot?

squeezemylemon

Well-Known Member
if a company don't want hire me but ask me to work for them as a "contractor", what do I need to do?
what kind of taxes I have to pay?
and how much?


I heared I have to report my company income every months to the IRS?

Or can i just fly for them ,a report my income to the IRS?
 

Cessnaflyer

Wooooooooooooooooooooooooooooooo
Depending where you are at you can have State and Federal income taxes to pay at the end of the year or do it quarterly. I think contracting is the worst way to go because you have to pay both employee and employer taxes which will eat a huge amount out of your profit. Last year I did a little contracting work and it ended up being about $9000 in taxes for the year. It was about 35% of my money I made I saved for taxes. The way I did it was I put the tax money I saved into an interest building account and then paid it all out at the end of the year. In the end I made about $50 in interest from the tax money. I would say only go this route if you are going to have a lot of work and you are capable of saving money without it being automatically taken out by the government. Usually less than reputable places have you as contractors so they don't have to take care of you. Watch out for this as well.
 

Mike H

Well-Known Member
As a self-employed contractor, you do get to deduct certain business expenses and reduce your taxable income- curency flights & recurrent training, for instance. Also insurance, office supplies, website & internet fees, advertising expenses
 

rframe

pǝʇɹǝʌuı
Starting a business or doing some contracting is humbling and good medicine for most people. Helps cure the entitlement attitude many people carry now days, and makes you appreciate what salespeople actually do.
 

dustoff17

Well-Known Member
We talked about this at length in another thread (can't find it right now). You could form a "corporation" and work for yourself through the "corp". You actually pay less in taxes in the long run.

The IRS basically sucks.....
 

CoffeeIcePapers

Well-Hung Member
We talked about this at length in another thread (can't find it right now). You could form a "corporation" and work for yourself through the "corp". You actually pay less in taxes in the long run.

The IRS basically sucks.....
That actually depends on a lot of factors.
 

drunkenbeagle

Gang Member
As a self-employed contractor, you do get to deduct certain business expenses and reduce your taxable income- curency flights & recurrent training, for instance. Also insurance, office supplies, website & internet fees, advertising expenses
You would be surprised just how many expenses a CFI can deduct.

The only catch is that as a schedule C (1099), you can only lose money so many years. Then your job is considered a "hobby" for tax purposes, and the deductions start going away.

As a C-corp, you can pretty much lose unlimited money.
 

z987k

Well-Known Member
Depending where you are at you can have State and Federal income taxes to pay at the end of the year or do it quarterly. I think contracting is the worst way to go because you have to pay both employee and employer taxes which will eat a huge amount out of your profit. Last year I did a little contracting work and it ended up being about $9000 in taxes for the year. It was about 35% of my money I made I saved for taxes. The way I did it was I put the tax money I saved into an interest building account and then paid it all out at the end of the year. In the end I made about $50 in interest from the tax money. I would say only go this route if you are going to have a lot of work and you are capable of saving money without it being automatically taken out by the government. Usually less than reputable places have you as contractors so they don't have to take care of you. Watch out for this as well.
If you paid 9k in taxes, you either made a • ton of money or did your taxes incredibly wrong.
 

dustoff17

Well-Known Member
We talked about this at length in another thread (can't find it right now). You could form a "corporation" and work for yourself through the "corp". You actually pay less in taxes in the long run.

The IRS basically sucks.....
That actually depends on a lot of factors.
Care to expand for us?

To the OP: To be more exact for you (and others), I should have wording my post as follows:
For ME, I paid MUCH less as a contract pilot forming a Corp and "working" for myself than I would have by not. For ME, the big taxes would have been assessed if I had to claim all of MY contract earnings as UNTAXED, ADDITIONAL INCOME at the end of the year. MINE was a compilation of Federal and State taxes, your mileage may vary depending on your State tax laws.

And, as previously mentioned, you do have a lot of tax write-offs for your expenses no matter which direction you choose.
 

squeezemylemon

Well-Known Member
if I understand correctly, I should open my own business and draw a minimun salary for myself, the rest will stay in my company.

By exemple,I can put my car, food , license, rating.in my company the rent, TV, internet etc paid by my salary.

If i paid directly the IRS without creating my company, they will charge me 30-35% of my total income.

Some companie in europe ask pilots to have their own business( ryanair, easyjet,...), the airlines don't have to pay vacation and days you are sick + taxes for each employee, and they don't have to pay you when they have no flights for you.
 

dustoff17

Well-Known Member
if I understand correctly, I should open my own business and draw a minimun salary for myself, the rest will stay in my company.

By exemple,I can put my car, food , license, rating.in my company the rent, TV, internet etc paid by my salary.

If i paid directly the IRS without creating my company, they will charge me 30-35% of my total income.

Some companie in europe ask pilots to have their own business( ryanair, easyjet,...), the airlines don't have to pay vacation and days you are sick + taxes for each employee, and they don't have to pay you when they have no flights for you.
You got it! You'll need to pay Fed, State, Workman's Comp, SS, etc for yourself along with your salary but the bulk of the money stays in a Corporation that you own!
 

CoffeeIcePapers

Well-Hung Member
Care to expand for us?
First, there are number of corporate structures, depending on the state. C Corp, S Corp, LLC, etc. They all cost money to structure and you will probably need to hire an accountant to do the books, especially if you do C Corp or S Corp. This will probably eat up any savings you would get from incorporating.

LLC is a bit more forgiving, but you still have to pay the fee to get it started, and the paperwork is a lot easier. I did the numbers when I was an independent CFI, and it was cheaper for me to just do it as a sole prop.
 

ComplexHiAv8r

Well-Known Member
Profit on the sub S cones across to personal for taxes then that money can be drawn from the company. Careful on some item being deductions, like rent above. Cant deducted your apartment to business unless you do work there, and then only the office area Car only if you have another to use, or it needs to be prorated. Quarterly taxes if not monthly on how you pay yourself. Insurance for when you bend mental, etc.

Long run worth it but you might want an accountant.
 

Cessnaflyer

Wooooooooooooooooooooooooooooooo
If you paid 9k in taxes, you either made a ton of money or did your taxes incredibly wrong.
In the end it was around 2k after deductions. I think it was around $35,000 on top of flight instructing and working the line on days between flying.
 

dustoff17

Well-Known Member
First, there are number of corporate structures, depending on the state. C Corp, S Corp, LLC, etc. They all cost money to structure and you will probably need to hire an accountant to do the books, especially if you do C Corp or S Corp. This will probably eat up any savings you would get from incorporating.

LLC is a bit more forgiving, but you still have to pay the fee to get it started, and the paperwork is a lot easier. I did the numbers when I was an independent CFI, and it was cheaper for me to just do it as a sole prop.
I filed and formed my S Corporation by myself at the local office of the State Department of Revenue. It was very easy to do; they walked me through the process and gave me a ton of literature that explained how to submit my quarterly taxes, work comp, etc. The cost was minimal.
As for the accounting, I have an accountant that completes my personal taxes every year. He charges about $200 for my family/personal stuff. Add $100 and my S Corp stuff is included. AND the $100 is deductible as well. Some contract pilots will go with this route or, as mentioned, an LLC. I think the paperwork is easier with the LLC but, at th eend of the year, the amount of money in my pocket is better with the S Corp.
 

Cessnaflyer

Wooooooooooooooooooooooooooooooo
I filed and formed my S Corporation by myself at the local office of the State Department of Revenue. It was very easy to do; they walked me through the process and gave me a ton of literature that explained how to submit my quarterly taxes, work comp, etc. The cost was minimal.
As for the accounting, I have an accountant that completes my personal taxes every year. He charges about $200 for my family/personal stuff. Add $100 and my S Corp stuff is included. AND the $100 is deductible as well. Some contract pilots will go with this route or, as mentioned, an LLC. I think the paperwork is easier with the LLC but, at th eend of the year, the amount of money in my pocket is better with the S Corp.
If I was going to be in it for any more than a year I would go this route. I went of the route of sole proprietorship with mine.
 

rframe

pǝʇɹǝʌuı
I have had a few businesses. A sole member LLC is very simple and functions much like a sole proprietorship and pretty cheap to setup. A "statutory close" S corp also has simpler record keeping requirements vs a normal s corp, if your state offers them... each state has different corporate laws, but LLC usually seems to be simplest for a simple sole owne. As soon as you have partners/investors, be sure to get legal guidance. Dont be penny-wise and pound-foolish at that point. Regardless, staying out of trouble with a corporation is about staying on top of your paperwork. File everything and get an accounting package (and learn how to use it), or hire an accountant to keep your books current.
 
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