Pay Question: Freelance Work - What Does This Mean?

Updated on October 19, 2011
S.T. asks from Denver, CO
15 answers

I'm so ignorant when it comes to business and money, bear with me. I've done freelance design work here and there, I usually just sent them an invoice for hourly work and get paid. So I guess it's just "under the table" - it's usually under $500 and never more than $1000 a year. I just finished a project and did 23 hours of work, they agreed to give me $25 an hour. Now they emailed me asking if 30/net would be ok? What does that mean? The way I understand there is net and gross pay, but isn't this only for a salaried job? That takes out a percentage for social security, etc. ? I'm so confused. My contact is a girl I used to work with, and I don't think she really knows that much about it. I asked if I need to fill out a tax form or anything and haven't heard back. If I do more work for them will I need an accountant? I am just a lowly designer, I don't know about business or anything. help! I don't want to shoot myself in the foot.

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So What Happened?

Wow, thanks. I feel like such an idiot. It looks like I'm going to be doing a lot more work for this company, so I will have to figure out what I'm doing and what they're doing. Can I just use my H&R Block person that's done my taxes in the past to ask about this stuff? Thanks!

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R.J.

answers from Seattle on

I always report my freelance work, but I've always taken out my own taxes, etc. I've never had someone withhold any portion of my pay. My fee is my fee. They pay that. They take care of their books, I take care of mine.

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L.O.

answers from Philadelphia on

30/net means that they will pay you the full amount in 30 days from the date on your invoice.
If you dated your invoice Oct 1, 2011, they will issue the check on Oct 31, 2011.

Since you send invoices and they are issuing a check, is not "under the table." If it were "under the table" then there would be no record of it at all, and therefore would not be claimed on your tax form. And just to let you know - getting paid under the table is illegal.

Net and gross pay is if you were their employee regardlessif you are hourly or salaried.
Gross pay is your payment before taxes and other deductions like medical or dental are taken out.
Net pay is the amount of pay after taxes and other deductions are taken out. In other words - the amount you would receive when you cash your check at the bank.
I would also consider talking to an accountant that handles small business. See if any give free consultations in your area. It would be a small price to pay compared to what you would pay if the IRS audited you.

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K.F.

answers from New York on

I'm an accountant. 30/net means they will pay you the balance of what they owe you in 30 days. Since your work is freelance there will be no taxes withheld and they may opt to provide you with a 1099 for their recording purposes. You should be including this income on your tax return. Please get in touch with a qualified accountant or financial planner to discuss your financial responsibility as it relates to this income. You don't want any problems with Mr. IRS.

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J.W.

answers from Houston on

It means they are going to pay you in 30 days.

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S.S.

answers from Boise on

Usually net 30 means 30 days to pay you.

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☆.A.

answers from Pittsburgh on

Net 30 is an invoice term. (Your term should have been on your invoice ( upon receipt, Net 15, Net 30, etc.) It means they will pay in full in 30 days. The terms have nothing to do with your "freelance" or "salaried" status.

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J.W.

answers from St. Louis on

If you make more than 600 a year from any one company they are required to file a 1099. That does not mean you are exempt from claiming the income on your taxes mind you. As a rule the amounts you listed don't sound high enough to pique the curiosity of the the IRS but you may want to be careful.

So for as the 30/net, in that context I don't know what they mean. They could mean that that will pay 30 an hour which will net you 25 after payroll taxes or other withholding they may apply. It could mean that they are going to net you 30 hours even though you worked 23 as a bonus or something.

I wish I could help you but there just isn't enough information here. I would suggest you get an accountant ASAP. If this company reports you, in other words files a 1099, it may be enough to trigger a look see by the IRS and they can be nasty folk if they get a good bone to chew on. :(

Okay, yeah I was thinking tax but others are correct it is also an invoice term thought I have never heard it used in this context. It is usually used as if you pay net in 30 days there is no interest but beyond that say 3% interest is charged. Since I don't do invoices I can't remember how it goes exactly.

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L.R.

answers from Washington DC on

If they have never issued you any tax documents, they're in trouble. And could get you in trouble too. If you make above a certain amount each year (check with the IRS and your state tax division about the amounts) they and you MUST report the income. You should be putting this on your taxes. Call an H&R Block or Jackson Hewitt for advice. You likely are below the amount BUT need records anyway.

I am a freelancer and my employer issues me an annual statement for tax purposes. You need to get that too. Even if your income is below taxable levels you should have the records to prove that it is if Uncle Sam or your state asks later!

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D.B.

answers from Charlotte on

.

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C.B.

answers from San Francisco on

They should pay you whatever you agreed to do the project for. Then it is your responsibility to pay your federal, and state income tax and social security. You are considered self-employed and you are actually supposed to pay your taxes on a quarterly basis. Also, you are supposed to pay social security - I believe it's $100 for every $1,000 earned. The company will give you a 1099 at the end of the year showing what they paid to you. That way they get to deduct that amount from their taxable earnings. Go to the IRS web site and request forms to use when you pay your quarterly taxes. (I don't think you can download it). Then, at the end of the year, give the 1099 to your tax person and an accounting of the tax payments and social security contributions you made throughout the year. They shouldn't need you to fill out any tax forms, but they will need your social security number.

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S.D.

answers from Phoenix on

Each state is different as far as how much you have to earn in order to pay or claim on your taxes. You may need to find out with the irs what the amount is in your town. You do sound self-employeed and will eventually make enough money to have to pay quartly taxes on your own and will need an accountant for that...the question is ( which you should find out ) is how much a year until you begin that process. The accountant will set up vouchers that you pay on a 3 mth basis that will be a self pymt from you as the date arises. It is just to help you keep organized and not have to be hit all at once in April . It is not manditory for you to pay them quartly but it sure helps manage the money better if you do.

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E.T.

answers from Albuquerque on

Yes - if they're asking if you'll take $30/net then they're saying they had planned to pay their portion of the taxes on top of the $25/hour they agreed to pay you. If they're asking about $30/net, then perhaps they're offering to pay you under the table. Or they might be lowering your price because they probably have to pay more than $5/hour in taxes.

You definitely need to talk to them and get this straightened out - because if they report your hours and you don't, you have a very real possibility of being audited. For what it's worth, the federal tax code says you must pay taxes on all income -- not just income over a certain amount. So what you're doing is technically illegial by getting paid under the table. Tons of people do it, but if you're audited and can't show where your money came from, you could be penalized.

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G.B.

answers from Oklahoma City on

If you are a contract laborer you are responsible for the taxes and all other charges. They pay you an agreed upon amount. You do the work then go on to other challenges at other businesses. If they hire you to do another specific project you are still a contract laborer.

If you take on a regular paycheck from them where you are expected to perform duties that are listed or given to you where you receive a regular scheduled paycheck then you are in fact an employee of the company and must do the tax forms for withholding.

I do ironing and other outside jobs. I file the income on our tax forms each year. I usually make over the $400 limit per year for non taxable income. I included a link to show what I mean. I pay out of pocket for things like hangers and starch, irons and ironing boards. My supplies are not constant but those things are expendable over time.

http://multimastery.hubpages.com/hub/how-much-money-do-yo...

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L.M.

answers from New York on

30/net is a term used for when the payment will be made - the usual term is "net 30" or "net 30 days".

They should also ask you to provide a W9 form. This form is used to provide them with your tax id #, since you are not a business it would be your social security number.

At the end of the year, the business will issue you a form 1099misc. You will need to report this income when you file your personal income tax return. Also, since you are self employed you'll be responsible for paying social security taxes. You may also be required to make quarterly tax payments to the IRS.

You really should check with a tax professional. My experience with H&R Block and other tax type services is that only a small percentage of their representatives are qualified to deal with this. Make sure you use a CPA (certified public accountant).

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K.G.

answers from Denver on

I think they are trying to pay you as a W-2 employee instead of an independent contractor. I am an accountant and am happy to assist you if you have any further questions. As long as it doesn't take longer than an hour (I don't think it will) I am willing to give you some free advice on this. You can call me at ###-###-#### or email [email protected]____.com is my husbands email address (mine isn't set up yet) but he will make sure I get it. My name is Kristi.

Updated

Just read some of the other posts and agree that they are referring to when they will pay you. Sorry I thought that you meant $30 net when I read it the first time. Still willing to help you if you have questions though. Whatever you do don't go to H&R Block. I rarely see a return they've prepared be accurate.

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