My old workplace wanted to contract me in to help with some on going issues they had. They ended up having me sign up to square which is a credit card service that charges a small fee when you charge a credit card.

Now I've only done a little work for my prior workplace and have had a couple of transactions charged. The company's credit card was charged, square took a small fee (I believe it was like 3-3.5%), and the rest went to my bank account.

How do I handle this during tax time? Obviously since I am not an employee of my prior company or even a contractor I will not get a W2. In turbo tax will I just enter this in as "consultant" work and give them a sum of what I gained (the amount minus the fees square took)?

  • 4
    It's pretty unusual for a contractor to be paid with a credit card. If you can get them to pay with check or direct deposit you could save the merchant fees. I don't see why they'd care, and if they do care, I'd be interested to know why. (Do they want to have the ability to revert the payment, are they so cash strapped that they can't pay you, is someone personally trying to benefit from the cash back, etc...)
    – TTT
    Nov 7 '19 at 20:49
  • Adding to @TTT's comment, the 1099 they issue will be the gross paid, Square's fees are expenses on your end, so definitely not ideal, if they are paying you extra to cover the 3.5% then it's a wash.
    – Hart CO
    Nov 7 '19 at 21:10
  • @HartCO - What do you mean by "wash" - yes they are paying me an additional 5% extra in my regular rate to cover fees.
    – JonH
    Nov 8 '19 at 2:32
  • @TTT - Im not really a contractor - I have a fulltime job with another company. My previous company simply asked if I could help them out on the side. I got the okay from my current workplace as there is no conflict of work interests...so not really a contractor I just guess I "act" as a contractor for them. They pay me via square because its a large company that isn't doing so well so they cannot contract me in because there are a lot of associated costs (insurance of over 2 million, etc.).
    – JonH
    Nov 8 '19 at 2:35
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    @JonH Yeah, so whatever they pay is your 'business income' but then you'll have credit card processing fees as a business expense, and the net is what you will be taxed on. Most of the time people don't get extra when paid via card, so they lose out, in your case that's not an issue, and that's great.
    – Hart CO
    Nov 8 '19 at 2:55

Since you mentioned a W2, I'm assuming this is based in the United States.

If you're a consultant, you should receive a 1099 at the end of the year (assuming you did more than a minimal amount of work over the course of the year- I believe $600). That 1099 should have the gross amount the company paid you. You'll then fill out a Schedule C (I assume you're self employed for purposes of this income) where you can deduct expenses. Note that you'll have to pay the self-employment tax on this income (15.3%) in addition to your regular income taxes-- you're responsible for both the employer and employee portions of the Social Security and Medicare taxes.

  • I am not a consultant - I actually have a full time job at another company. I am just helping my prior company out with hours here and there. They pay me via square (credit card). So would they still send me a 1099?
    – JonH
    Nov 8 '19 at 2:33
  • @JonH - If you are doing work and you're not an employee, you're a contractor. You should get a 1099 unless you happen to do less than $600 of business with them. Nov 8 '19 at 2:47
  • ok so they will send it to me or I need to ask them ? I don't mind the fact that its via credit card as my rate was increased to make up for it.
    – JonH
    Nov 8 '19 at 2:48
  • @JonH - They will do it automatically (at least they are legally required to). Make sure you understand the tax implications particularly if you need to pay quarterly taxes. Nov 8 '19 at 2:50
  • I dont pay quarterly taxes - just once at the end of the year. What do you mean tax implications ?
    – JonH
    Nov 8 '19 at 2:52

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