1

I closed my repair shop over a year ago and now work full-time in IT for a private corporation. I was just approached by a former client who practically begged me to assist with a major install project. I agreed, but do not know how to legally accept payment. This would truly be a one-time payment for roughly $1,000 with maybe a couple hundred dollars of follow-up work over the course of the year. I have no intention of doing this sort of thing for other clients. I would, of course, report all income to the IRS and my state.

Is this allowable? I know I’m leaving myself open to liability, but that really isn’t my concern. I just want to make sure the tax man is happy. Does anyone know if this is permissible, or must I go through the hassle of opening a business?

6 Spice ups
2

To some degree it depends on what your contract of employment says. If I were you, I’d talk to my line manager. Many firms allow employees to moonlight, provided it’s all above board. And some firms look very poorly on such things - you could find yourself fired.

Stressing it’s a former client can help - After all, suppose you left - wouldn’t they want you to help them later?

1 Spice up
3

Thank you for your reply, but I’m not concerned about my current employer; there is no conflict of interest here. My only concern is not incurring the wrath of the IRS.

4

As long as you report the income, you are good with the tax man.

5

Make sure this isn’t a conflict of interest with your current job. You may need to get this in writing from your boss and/or HR. Then make sure you have a contract with your former client covering the scope of work. In addition to you reporting this for tax purposes your client needs to report it as well, but that’s his concern, not yours, unless you report less than what he reports. This is why you need a contract specifying the scope and how the payment is to be made (for completion, T&M, etc.). At the end of the job you may need to present your client with an invoice (It can be a simple Word created document stating the charge and purpose.) simply so you both have consistent records of the work and dollar amounts.

The above makes it sound difficult but it really isn’t =>

  • Get approval from your current boss/HR to confirm no conflict of interest; for work entirely off company time just confirm your client isn’t your new company’s client as well.
  • Simple Statement of Work showing both scope and your fees; signed by both parties
  • Invoice for fees;
  • Report on Taxes fees actually paid, even if you don’t receive a1099 from the client.
2 Spice ups
6

I know you may not perceive any conflict of interest, but what does your contract of employment say? :slight_smile:

7

You’ll fill out a W-9 for the client using your own SSN rather than a business EIN, that’s the only difference from what you were doing before. At the end of the tax year, they’ll issue you a 1099-MISC form for you to report on your taxes along with your W-2.

1 Spice up
8

Thank you Mike and Da_Schmoo. I appreciate the input.

You give good advice tfl, but it doesn’t apply here. I don’t think I made it clear that I provide IT support to a company. I do not work for an IT company. Still, I will advise my employer what I am doing just to make sure no one gets the wrong idea. Thank you!