NY Freelancers and Studios: A Tax Alert

NY Freelancers and Studios: A Tax Alert This note is for SPD members who live and work in New York City and the surrounding Counties:

A new MTA Tax applies to self-employed individuals and freelancers, and the first payment is due to New York State by Monday, November 2nd, 2009. We're hearing that many freelancers and independent studios haven't yet heard about this new tax, and in order to try to save any of us the pain of penalty from the IRS, we asked our SPD bookkeeper to share some advice while he was setting us straight ourselves:

First, an introduction to Dan Fannon, the SPD bookkeeper:
As the bookkeeper for SPD, I have over 25 years experience in accounting for Graphic Artists and the publishing and design industry. I know how easy it is to miss changes in the tax laws (is there any more dreary subject in the world?), but not knowing or inaction can end up being more than an inconvenience -- it can be costly and nerve-wracking. Please read all of this. I understand that it's boring beyond description, but not as boring as finding yourself in trouble with the NY State Department of Taxation.


What is this new tax?
Ah, the MTA TAX (called the NY MCTMT TD MSC):
Every once in a while, the government comes up with a new way to get revenue, and last May New York State enacted a new tax for employers and self-employed individuals (including partners in partnerships and members in LLCs) who engage in business activities within the Metropolitan Commuter Transportation District. The money is supposed to stop subway service cuts and a fare increase beyond the new 25-cents increase.

If you are a business or an independent and live and work in the area that the MTA serves, you have to FILE and PAY this new tax by Monday, November 2, 2009.

If you are employed, your employer is already paying this tax on your behalf.


So what do we need to know?

- Who has to file and pay:
Any self-employed person living in the MTA District. This includes all five boroughs of New York City, and the counties of Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess and Westchester.

 - The tax rate is 0.34% of your NET EARNINGS

 - What do they mean by "Net Earnings"?
Net Earnings is defined as your Income less the business expenses that you will report on your annual tax filing

 - How often is the tax to be paid and the reports filed?
Self-employed individuals must make quarterly estimated payments, and file an annual return for the MCTMT by April 30th of each calendar year.

- When is the first tax due?
The first payment required for 2009 is due Monday, November 2, 2009 -- this will cover the period: January 1st 2009 to September 30th, 2009. The following quarterly payment is due Monday, February 1, 2010.


Realistically, what should freelancers, independents and studio-owners do?

Pulling the covers over your head is not an option. Get your MTA taxes filed and paid to be in compliance.

1)    Call your tax accountant or tax professional and have her calculate and submit the filing for you.

2)    If you want to do it yourself, then you can go to the NYS online Tax center
(www.tax.state.ny.us/nyshome/online.htm) and then register online, complete the MTA report and pay either online or send a check. However, be aware that the site doesn't make it easy for the self-employed, so it's best to print out the forms, complete them by hand, and mail it in with your payment.

While we're on the subject -- always send ANY tax filing or payment by Certified Mail with a return receipt requested. That way, you will have proof that you paid and paid on time.

Dan, we're not all geniuses with the math. How should someone figure out how much to pay?
Remember - when you are calculating your Net Earnings, make sure that the expenses you are claiming are within the guidelines of the usual deductions you take on your annual tax file to the IRS and NYS.

How to calculate the MTA tax:

-    Take your income from your clients for January 1 to Sept 30
-    Subtract your Business expenses for the same period.
-    The result is your NET EARNINGS
-    Multiply your Net Earnings by TEN (10)
-    Divide that figure by TWELVE (12)
-    Take that figure, and multiply it by .0034 (yes, .34 of 1%) -- THIS is the MTA tax that you should pay by the deadline of November 2, 2009.


Dan, thanks for helping us realize what we'll all be doing with that extra hour on Halloween weekend.

Well, I'm sorry to be the bearer of bad tidings - as if we need another way to spend money right now -- but I wanted to be sure that our Members were made aware of this MTA tax.
---- Dan Fannon



Image above from the Song Chart Pool on Flickr; "Mo' Money, Mo' Problems" from weatherpattern.


  • SPD HR

    Thanks for the heads-up, @PALOSNY: we've seen this addressed both ways, but are amending the note above to note "income from clients from Jan 1 2009 to Sept 30 2009 is needed to report" -- it's a small enough amount that, while we'd rather not pay more than necessary ever, better safe than sorry this time.

    New York state says they'll have extra people working the phone lines today about this, info can be found in further detail on that here:

    http://www.nystax.org/mctmt/default.htm

  • Palosny

    Thanks for the info

    One question when sending in est. tax by Nov. 2 (tomorrow):

    You mention that only income from clients in 2009 from March 1 to Sept. 30 is needed to report.

    But what about income in January and February of 2009?

    Shouldn't those be included since the tax starts January 1 2009?

    Thanks

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