How do I deduct payments to others out of a single payment to the group for contract work?
You send the proper form to the other person for the amount you gave him, and file it as your business expense on your Schedule C.
I don't think you need to bother with trust accounts.  The point of a trust account is holding funds that aren't yours yet.  You take a retainer fee that you have yet to earn.  As you work, you bill your hourly rate, your client signs off and you take possession of the funds.   You're going to work a project, you'll take a partial payment as a deposit and partial payment upon completion.  But this is a payment to you, not money transferred to you to hold until you earn it at a later date. Your contract can specify remedies for missing a deadline, or any other thing that could happen. "This is going to depend on the tax jurisdiction and I have no knowledge of the rules in Illinois.  But I'd like to give you some direction about how to think about this.   The biggest problem that you might hit is that if you collect a single check and then distribute to the tutors, you may be considered their employer.  As an employer, you would be responsible for things like  This is not meant as an exhaustive list.   Even if not an employer, you are still paying them.  You would be responsible for issuing 1099 forms to anyone who goes above $600 for the year (source).   You would need to file for a taxpayer identification number for your organization, as it is acting as a business.  You need to give this number to the school so that they can issue the correct form to you.  You might have to register a ""Doing Business As"" name.  It's conceivable that you could get away with having the school write the check to you as an individual.  But if you do that, it will show up as income on your taxes and you will have to deduct payments to the other tutors.   If the organization already has a separate tax identity, then you could use that.  Note that the organization will be responsible for paying income tax.  It should be able to deduct payments to the tutors as well as marketing expenses, etc.   If the school will go for it, consider structuring things with a payment to your organization for your organization duties.  Then you tell the school how much to pay each tutor.  You would be responsible for giving the school the necessary information, like name, address, Social Security number, and cost (or possibly hours worked)." I would say generally, the answer is No.   There might be some short term relief to people in certain situations, but generally speaking you sign a contract to borrow money and you are responsible to pay.  This is why home loans offer better terms then auto loans, and auto loans better than credit cards or things like furniture.  The better terms offer less risk to the lender because there are assets that can be repossessed.  Homes retain values better than autos, autos better than furniture, and credit cards are not secured at all. People are not as helpless as your question suggests.  Sure a person might lose their high paying job, but could they still make a mortgage payment if they worked really hard at it?  This might mean taking several part time jobs.  Now if a person buys a home that has a very large mortgage payment this might not be possible.  However, wise people don't buy every bit of house they can afford.   People should also be wise about the kinds of mortgages they use to buy a home.  Many people lost their homes due to missing a payment on their interest only loan.  Penalty rates and fees jacked up their payment, that was way beyond their means.  If they had a fixed rate loan the chance to catch up would have not been impossible. Perhaps an injury might prevent a person from working.  This is why long term disability insurance is a must for most people.  You can buy quite a bit of coverage for not very much money. Typical US households have quite a bit of debt.  Car payments, phone payments, and either a mortgage or rent, and of course credit cards.  If income is drastically reduced making all of those payments becomes next to impossible.  Which one gets paid first.  Just this last week, I attempted to help a client in just this situation.  They foolishly chose to pay the credit card first, and were going to pay the house payment last (if there was anything left over).  There wasn't, and they are risking eviction (renters).     People finding themselves in crisis, generally do a poor job of paying the most important things first.  Basic food first, housing and utilities second, etc...  Let the credit card slip if need be no matter how often one is threatened by creditors.  They do this to maintain their credit score, how foolish. I feel like you have a sense of bondage associated with debt.  It is there and real despite many people noticing it.  There is also the fact that compounding interest is working against you and with your labor you are enriching the bank.  This is a great reason to have the goal of living a debt free life.  I can tell you it is quite liberating. @JoeTaxpayer's answer outlines how to value it. Some other considerations: As I understand it, some public pensions may be tax-free if you still live in the state that is paying the pension. E.g. when a Massachusetts teacher receives pension, it is exempt from state taxes, but if that person moves to Vermont he will have to pay Vermont income tax on those payments. So if you plan to stay in the state post-retirement, this provides additional value. Pension payments aren't fully guaranteed by the PBGC. And not all pension plans are fully funded. Depending on the political and economic environment when you hit retirement, your retirement plan could suffer. (And if you aren't working, you may not have a union vote any more when the other working members are voting on contract amendments that affect pensions.) I'm not certain of all of the rules, but I hear news reports from time to time that formulas like what you've posted in the original question are changed through negotiation with the union. If you make an employment decision using the formula in year X and then the formula changes in year X+10, your expected pension payment will change. "I'm working on similar problem space. There seems to be some working ambiguity in this space - most focus seems to be on more complex cases of income like Dividends and Capital Gains.  The US seems to take a position of ""where the work was performed"" not ""where the work was paid"" for purposes of the FEIE. See this link. The Foreign Tax Credit(FTC) is applied (regardless of FEIE) based on taxes paid in the other Country. In the event you take the FEIE, you need to exclude that from the income possible to claim on the FTC. i.e. (TOTAL WAGES(X) - Excluded Income) There is a weird caveat on TOTAL WAGES(X) that says you can only apply the FTC to foreign-sourced income which means that potentially we are liable for the on-US-soil income at crazy rates.  See this link.. Upon which... there is probably not a good answer short of writing your congressperson." "It's not possible to determine whether you can ""expect a refund"" or whether you are claiming the right number of exemptions from the information given.   If your wife were not working and you did not do independent contracting, then the answer would be much simpler.  However, in this case, we must also factor in how much your contracting brings in (since you must pay income tax on that, as well as Medicare and, probably, Social Security), whether you are filing jointly or separately, and your wife's income from her business.   There are also other factors such as whether you'll be claiming certain child care expenses, and certain tax credits which may phase out depending on your income.   If you can accurately estimate your total household income for the year, and separate that into income from wages, contracting, and your wife's business, as well as your expenses for things like state and local income and property taxes, then you can make a very reasonable estimate about your total tax burden (including the self-employment taxes on your non-wage income) and then determine whether you are having enough tax withheld from your paycheck.  Some people may find that they should have additional tax withheld to compensate for these expenses (see IRS W-4 Line #6)." "They are basically asking for the name of the legal entity that they should write on the check. You, as a person, are a legal entity, and so you can have them pay you directly, by name. This is in effect a ""sole proprietorship"" arrangement and it is the situation of most independent contractors; you're working for yourself, and you get all the money, but you also have all the responsibility. You can also set up a legal alias, or a ""Doing Business As"" (DBA) name. The only thing that changes versus using your own name is... well... that you aren't using your own name, to be honest. You pay some trivial fee for the paperwork to the county clerk or other office of record, and you're now not only John Doe, you're ""Zolani Enterprises"", and your business checks can be written out to that name and the bank (who will want a copy of the DBA paperwork to file when you set the name up as a payable entity on the account) will cash them for you. An LLC, since it was mentioned, is a ""Limited Liability Company"". It is a legal entity, incorporeal, that is your ""avatar"" in the business world. It, not you, is the entity that primarily faces anyone else in that world. You become, for legal purposes, an agent of that company, authorized to make decisions on its behalf. You can do all the same things, make all the same money, but if things go pear-shaped, the company is the one liable, not you. Sounds great, right? Well, there's a downside, and that's taxes and the increased complexity thereof. Depending on the exact structure of the company, the IRS will treat the LLC either as a corporation, a partnership, or as a ""disregarded entity"". Most one-man LLCs are typically ""disregarded"", meaning that for tax purposes, all the money the company makes is treated as if it were made by you as a sole proprietor, as in the above cases (and with the associated increased FICA and lack of tax deductions that an ""employee"" would get). Nothing can be ""retained"" by the company, because as far as the IRS is concerned it doesn't exist, so whether the money from the profits of the company actually made it into your personal checking account or not, it has to be reported by you on the Schedule C. You can elect, if you wish, to have the LLC treated as a corporation; this allows the corporation to retain earnings (and thus to ""own"" liquid assets like cash, as opposed to only fixed assets like land, cars etc). It also allows you to be an ""employee"" of your own company, and pay yourself a true ""salary"", with all the applicable tax rules including pre-tax healthcare, employer-paid FICA, etc. However, the downside here is that some money is subject to double taxation; any monies ""retained"" by the company, or paid out to members as ""dividends"", is ""profit"" of the company for which the company is taxed at the corporate rate. Then, the money from that dividend you receive from the company is taxed again at the capital gains rate on your own 1040 return. This also means that you have to file taxes twice; once for the corporation, once for you as the individual. You can't, of course, have it both ways with an LLC; you can't pay yourself a true ""salary"" and get the associated tax breaks, then receive leftover profits as a ""distribution"" and avoid double taxation. It takes multiple ""members"" (owners) to have the LLC treated like a partnership, and there are specific types of LLCs set up to handle investments, where some of what I've said above doesn't apply. I won't get into that because the question inferred a single-owner situation, but the tax rules in these additional situations are again different." Chris, since you own your own company, nobody can stop you from charging your personal expenses to your business account. IRS is not a huge fan of mixing business and personal expenses and this practice might indicate to them that you are not treating your business seriously, and it should classify your business as a hobby. IRS defines deductible business expense as being both: ordinary AND necessary. Meditation is not an ordinary expense (other S-corps do not incur such expense.) It is not a necessary expense either. Therefore, you cannot deduct this expense. http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deducting-Business-Expenses