W-2 Contractor/Employee & Miscellaneous Itemized Deductions (WHAT HAPPENED?)


(chiming upbeat music) – [Toby Mathis] What deductions can
I take as a W-2 contractor? So that means you’re an employee. – [Jeff Webb] So yeah, most
of those were wiped out with the tax law change beginning in 2018. – [Toby] Miscellaneous,
itemized deductions went to the wayside. – [Jeff] Yeah, so if you used to do those, what was the 2106 called? The employed expenses. – [Toby] Yeah, unreimbursed. – [Jeff] Employee unreimbursed expenses. – [Toby] Yeah, unreimbursed
expenses are gone. Which is why teachers, boy it sucks to be a teacher right now. – [Jeff] Yeah, now if you’re in a state that still taxes you, like
California rather than Nevada, you still want to tell us
about any of those expenses. Because you’re state may
still allow those deductions. But yeah, most of the
other deductions are gone. I think the school teacher deduction is the only one I can
think of that’s left. The $250.
– The what? – [Jeff] The $250 Educator Expense. – [Toby] Is that still there? – [Jeff] I think it’s still there. – [Toby] Yeah. – [Jeff] If I’m wrong, I’m sorry. – [Toby] They could have a contractor and they’re running around,
they’re driving their car, or they’re buying tools
and all of this stuff. And can they write it off, no. They are completely toast. You’re taking the standard deduction, or you’re going to itemize. But you’re not, when you’re itemizing you do not get the benefit of
those unreimbursed expenses. Let’s see, it says teacher
is under adjustments. – [Jeff] Yeah, that’s where it used to be. – [Toby] Yeah, so– – [Jeff] And I thought
they had retroactively– – [Toby] Yeah, somebody else is saying the teacher 250 is still there. Well they got all of these
smart people out there. Wait are you part of the
93% that said that you had– Now we’re going to have the questions, people going “what is this 93”. – [Jeff] So in this
case of what to deduct, if I, if I’m like the contractor guy. – [Toby] Everybody’s saying
it’s still available. They’re like jumping on you Jeff. – [Jeff] Hey, I said I thought
it was still available. – [Toby] Yeah. – [Jeff] So if you’re a W-2 employee that has substantial
expenses you’re incurring, do you think about going independent? Or working something different with your– – [Toby] Yeah, I would actually be looking and see whether I could be
an independent contractor. If that’s the case. If I’m having to incur
a bunch of the expenses, then there’s two things
that I’m going to do. I’m either going to go to my employer say, “Hey, you need to reimburse me.” – [Jeff] Right. – [Toby] Or I’m going to say, “You need to pay me as an
independent contractor.” But don’t hire me as an employee and make me incur all my costs on my own. – [Jeff] Because your
employer can reimburse you, and deduct those costs. – [Toby] Write it off. Yeah, right the employer
can do an accountable plan and write off all of those expenses. You know, say, “Hey, do
that, don’t give me a bonus. “Write off all my expenses instead.” And it sounds funny,
but that’s literally it. If you walk up to your
employer and you say, “Look, I’m incurring an extra
three-thousand dollars a year. “Instead of giving me
bonuses or anything else, “how about you just reimburse these?” It’s tax deductible with the company. It’s not, it doesn’t have
to go through payroll. So there’s no FICA, no
FUTA, SUTA, workman’s comp, and all of that garbage that
gets added on to these things. It’s just flat out
cashola into your pocket. I always call it Krispy Kreme money. If your employer says
bring in Krispy Kremes and you bring in all those Krispy Kremes. Those are tasty donuts, by the way, if you don’t know what those are. So we’re talking about
tacos and Krispy Kremes. So let’s say you bring
in the Krispy Kremes, your company can just hand
you a check for that amount. You don’t have to report it anywhere. It doesn’t go anywhere on your return. That’s what the beautiful part of what an accountable plan is. If your employer does it, it’s great. Now somebody says that,
an independent contractor, you may lose your bennies,
which may cost you more, get them to reimburse you. Robert, I agree. But on the, when you say
the bennies, your benefits, you’re always going to factor that in. So the employer is
paying whatever your W-2, I use 20% as a rule of
thumb of what it’s costing your employer to have you
with the form of benefits. And so they’re going to save that. So I would be looking at ’em saying, “Hey, pay me that extra 20%.” Then you can go get your own benefits. And if you’re set up right, like lets say you’re doing it as a C Corp, and you want to be able to expense all your medical, dental,
vision, and everything. 100% deductible, 100%. All of your copays, everything. So, health insurance is
the biggest, absolutely. You know, here’s the thing. It’s also when you’re on your own. Right now it costs me about
$500 for a primary employee, and with a family it costs about another thousand bucks to cover them. If I went to Medi-Share or
some of those outside sources, that are not big health
insurance, but that are, they still work under
the Affordable Care Act, but they’re not typical
insurance, high deductible plans. I can knock that down to
about $600 a month, total. And I can’t do that as a big employer. I have to use certain types of plans to cover group plans and it stinkolas. We got a lot of questions coming out. I’m going to keep jumping through this. So, the long and short of it is, the best the scenario for
you is to get your employer to comp, is to reimburse you. If they won’t, you may want to consider becoming a contractor. An independent contractor I should say. And setting up your business separately. Depending on how much you’re making you could actually save
yourself quite a bit of money. If you’re an S Corp, you could
have the 20%, 199a deduction, against all of your income, which could knock your income way low. You could avoid the self-employment tax, which is when you’re getting W-2, you’re paying FICA on all of it. Your employer is paying
half, you’re paying half. We could avoid a big chunk of that. You can do your own 401K
and could defer 19,500 of the first amount of money
you make into your plan. You could hire your spouse. You can hire your kids. You can do all sorts of fun stuff. So I tend to go a little nutty on this, but, get a lot of things. Where do I get more information on that low cost health plan? Go to Medi-Share. I don’t know how to spell
it, but I could look it up. There’s folks out there. But you go to Medi-Share and a bunch of alternative health plans. What they are is, they’re
usually religious groups, that get together and say, “hey
we’re exempt from the ACA.” And they’re pooling their risk pools. So they’re kind of,
they’re very different, and they are a lot more,
a lot less expensive. What you do is, you do one of those, and then you do a high-deductible. When I say high-deductible, it
might be a $10,000 deductible health insurance plan which
costs you very little, because there is very little
chance you are going to use it. But if you have a catastrophic
injury, cancer, or what not, they’ll come in and pick you up. (melodic music)

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