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  1. #1
    SitePoint Zealot Matt_M's Avatar
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    Splitting up payment / taxes question

    Hi,

    If I work on a project with a partner and we split the earnings, but the client writes me a check for the entire amount then I write my partner a check for his half, can anyone tell me what I need to do so that I only pay taxes on the half that I actually earned and not the half that I had to pay to my partner?

    Thanks

  2. #2
    SitePoint Wizard bronze trophy
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    (at least in the UK....) it doesn't matter to the tax man who the cheque is made out to, nor does it matter what account it was paid in. All that matters is how much net cut you got, that's what you pay tax on.

  3. #3
    SitePoint Wizard gold trophysilver trophybronze trophy dc dalton's Avatar
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    You can deduct the payment to your partner right off the income (the total paid to you) as an expense.. Just make sure you document it as such and you'll be fine.

  4. #4
    SitePoint Wizard silver trophy
    beley's Avatar
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    If it's over a certain amount, you will need to fill out certain paperwork (and have him fill out some too). He will need to sign a W-9 Request for Taxpayer Identification Number (or SSN) form. That will give you something in writing that you will have saying he was in fact working for you. Then, at the end of the year, you'll have to report how much money he made. I'm not sure what this form is, because my accountant fills it out.

    I'm not sure what the amount is, but I think it's $600. My first year in business I paid a subcontractor $1000 and had to eat the taxes on it because I didn't get the proper paperwork filled out.

  5. #5
    SitePoint Zealot chihpih's Avatar
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    ive had the same issue in the past. what we did was split the earnings and when the person paid taxes the other person gave him 1/2 of tax amount
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  6. #6
    Not now, I'm kinda busy. pdxi's Avatar
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    If the check will be written to your name, I suggest that you report your partner as a "subcontractor", whether he is in actuality or not. You will need the appropriate tax filing paperwork, the form names of which I cannot remember at the moment. Check out www.irs.gov and www.oregon.gov for more information.

    Side note: I have to say, as an Oregonian, that the State of Oregon has one of the best information web sites in the country.

    Make sure to have your partner give you an invoice, just to have it all on paper.
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  7. #7
    Life is short. Be happy today! silver trophybronze trophy Sagewing's Avatar
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    The limit is $600, yes. Anything more than that and you have to report to the IRS per Beley's post. It's easy, though!
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