I have a job that I get paid X per day. It is not salaried nor am I connected to the business that owns the plane. They want to pay me X as an FO to sit in the right seat.
Now my question is: How does that work with Taxes? How do I show that i have $ coming in? My family needs a new car and I need to show that I bring in Y amount each month. How does that work? Is a business license required? Thanks in advance.

 

Dont need a business license. If you are PIC rated on the aircraft, make sure you are getting paid a captain rate per day-- you are taking a job on a day that could be used to fly as a captain for another operator-- so if you are rated as PIC, you are always paid as PIC, even in the right seat.

If you are contract with a company, make sure you are "contract"-- meaning YOU choose your days that you work, you are not TOLD when to be at work, etc. The IRS has definitions of "contractor" on their website, I suggest you look at them.

Also, for taxes, I highly recommend doing a SEP IRA to lower your taxable income and also allow you to save for retirement. As a contractor, you are going to pay a higher percentage of tax than if you worked for a "normal" employer.

As far as showing a bank you have money coming in to buy a car-- if you have some kind of commitment letter from the company for x number of hours per month, that may help. Also, if you have done this for a number of months and can show consistency, that will help as well... otherwise good luck!! banks are very strict now with lending money, as we all know.

My wife is an independent contractor with her work, and I did contract work while I was laid off last year, and still do contract work with my current status. It can be very lucrative!!

Hope this gets you started, and good luck.

(I did not proof read-- sorry for spelling errors if any)

-spike

 

I'd think the company should issue you a 1099 - at least that's what we do with our contract pilots.

 

If you are not, it is the company that gets in trouble, not you...but you still need to know the difference between being a "contractor" and an "employee".

Excellent point, QS!

Also, I agree. They need to issue you a 1099. I invoice my clients either monthly or bi-weekly (depends on the client and what we agreed upon). At the end of the year, they send me a 1099. I usually set aside 30% of my gross earnings for taxes. Only net income is taxed, but 30% of the larger number typically gets me a little wiggle room at the end of the year. I also make quarterly estimated payments. Keeps me from having to pay a penalty/interest/bla bla bla.

-mini

 

I'm a contractor and was recently told by a mortgage lender that I had to have that job for TWO YEARS before I could use my contractor's salary as a basis for getting a loan. Does anyone else know of a work around here?

Like minitour - I also make quarterly tax payments and I get a -1099 from my employer.

USMCFLYR

 

Nope. Sounds pretty standard, unfortunately.

-mini

 

Hit the Powerball.

 

This is true-- and a point I forgot!! We had to show 2 years of my wife working as an independent contractor for the house loan we were approved for this year when we moved. That and she had to show copies of the checks she had received over the last several months.

As a contract pilot, you will get a 1099. Remember *everything* you do for your contract flying is a write-off... dry cleaning, uniforms, sunglasses, computers, accounting software, etc.... I save *everything* for my accountant at the end of the year (small business owner as well, so it is very important to write-off as much as I can). Again, the SEP-IRA (self-employment IRA) is another fantastic way to lower your taxable income, and can save you thousands to the govt. We also make quarterly payments-- again, will save you hundreds in penalties at the end of the year-- just get with your accountant, or find one if you do not have one and explain your situation-- they have handled situations like this before, I can guarantee it!

There is a lot of good info on this thread. Contract flying can be very financially rewarding, but it is intimidating having to figure out all of the odds and ends that a company used to take care of for you. It also helps if you have a spouse with a "real" job that has health insurance!! Errrr wait... we all have health insurance now! right? ooorrr...what changed? Oh yeah, I pay more... nothing else.

Hope this helps some more...

-spike

 

Thanks all. I have printed this out and well see how I catch on. There will probably be more questions in the future.

 

Is anyone that is doing contract flying being required to carry their own workers comp insurance?