Show HN: Painless1099 – automated self-employment taxes
painless1099.com
painless1099.com
If I wasn't switching into a FT role, i'd be all over this.
But I always got paid via check, which went into my bank account. I think the thing that would make the most sense is to be able to setup a separate account with your own bank, so you can still direct deposit without worrying about ATM fees or what have you, and still be able to keep painless1099 in the loop of money by giving them access. Anything else introduces friction / fees that would deter usage; and i really really hate fees. (a reason i dont do paypal, for example)
Anyway, great idea. I hope you can make it work.
Sounds like they could make some referral cash off of referring people to checking accounts.
But the very nature of 1099 means you could be working with a variety of clients, and are more likely to receive payment via check or other one-time method, versus direct deposit which is more common for W2 employees. I can't tell you how many one-off gigs i've had, or on/off where they just want to send me a check and thats the last i hear from them for months or ever; i'd get laughed at if i asked for direct deposit. (and did by a long term client: they like writing out checks)
If you want to actually solve this for 1099ers, your going to have to do more than just what works for a subset of users; and supporting checks absolutely needs to be on your roadmap at some point, at minimum. Otherwise... I don't think you really have any sympathy or understanding of the very field that you're trying to solve a problem for.
Totally agree here. We're working on getting some folks running on the current build & making sure it's stable, but we've already identified a couple options for remote check capture to be included when we get to building out native mobile. It's definitely key to serving a large portion of the total market.
It works exactly as you described- money goes into your account first, then taxes are calculated and moved to your tax savings account. You can get paid via check, zero friction.
https://painless1099.com/home/fees
Are you guys from Nebraska? Did you just randomly pick Lincoln Savings Bank to partner with?
https://painless1099.com/public/docs/33611.pdf
just curious, do you automatically send withholding to the IRS automatically? I guess you make money with the withholding money you take in every paycheck but only transmit at the end of a quarter?
I never thought about this. Does an employer do the same with W-2? Assuming you have 100 employees paid monthly and you withhold $1 for each employee per pay month... For example, if the pay for the month of January would send me back $100 which the employer gets to keep That $100 until the end of March? And same for the pay period of February? Is this illegal? I've read that you can't do that with payroll tax but is income tax treated differently?
Sorry if these are stupid questions. I don't have a background in accounting.
2)We are NOT from Nebraska, but we found an awesome tech-forward bank in Lincoln Savings Bank who saw a pain point in the 1099 world and got really excited about helping us build out a tax solution.
3) We don't automatically send quarterlies (yet) but we do send reminders and make it really easy to remit that payment every quarter. Shortly, you'll see an automated solution built into the product.
4) In answer to your W-2 question, yes, employers automatically withhold taxes for their employees and remit that money to the IRS throughout the year. Essentially the government holds on to this cash all year and if you've overpaid, you'll get a refund. This is what happens in a fair amount of W-2 job situations, but when you're self-employed, you're on the hook for taxes and are expected to separate funds and pay estimated quarterlies throughout the year - a tough thing to manage on top of client work, life, and whatnot.
The correct price lies somewhere between $0 and the cost for you (or a CPA, $80-150/h) to do it. A percentage is fine too, as it's essentially risk free for the user (no income = no cost that month).
But it's not worth $100/mo, or 2% of my gross income, for example. I didn't make so much as a freelancer that i could tolerate either of those financially. And It doesn't remove the need for a CPA, just helps with the ability to pay that taxes you owe.
Not about risk, it's about people putting their hands in my pockets. I can only tolerate so much. I'll pay to solve the problem and make sure they can continue to do so for me, but if it becomes a matter of opportunistic behavior on the company's part, I'll go elsewhere or nowhere instead of being taken advantage of.
And you're absolutely right, we don't remove the need to have a CPA, we DO, however, reduce the time you need to interact with your CPA and make it really easy for them to do their job. Given the hourly rate of my CPA, I've paid for Painless if I can reduce his work by almost an hour. We're finding that CPAs and freelancers alike are really digging what we've built thus far.
All in all, this is a product to help people like us solve the same problems we've run into over the years.
Regardless of mechanics or feature set discussed elsewhere in this thread, selling me on an extra $120/year is an increase of 30% to my hard cost of dealing with taxes per year.
I think the hard sell will be getting contractors to accept that payment will be delayed three more days by use of this service. A lot of clients pay late or require a bit of time and management to get your money.
What led you to address this problem from the banking, rather than accounting, side? For me, the banking part wasn't a big source of friction. It was keeping up with income and expenses, trying to determine what I could safely deduct, and coming up with a reasonable estimated quarterly tax bill (especially for my state taxes, which I could only send in yearly). After that was done, moving the money around was relatively trivial. Even if your product removes all that friction, I would still think that requiring users to open up another bank account and essentially give you control over all their revenue would be a huge hurdle to overcome.
Also, were I still a contractor, not being able to track expenses as well would be a deal breaker for me, especially in months where cash flow was tight. Yes, doing my taxes is a hassle, but compared with the hundreds or thousands I might save on a quarterly tax bill with expenses accounted for, it is a minor annoyance.
That being said, I'm not sure what this product can do for me over what I'm using now.
Actually, I just looked at their FAQ and they don't track expenses or anything... things you can do with Quickbooks.
Now I'm not trying to down this company, but just am pointing out to others that a mature version of this product already exists (minus the auto-save) and that I can't identify "why" I should switch over to Painless.
The only reason I'm hesitant to switch is because you're offering this for free. How do I know you're still going to be in business in a year from now? In other words, what is your business model?
This sounds exactly like what I wanted.. but I don't know if I want to be the early adopter guinea pig for something that involves setting up new bank accounts and automatically routing my finances around. I was kind of hoping my bank would eventually build conditional features into the automatic transfer / bill pay, as I'd much rather keep all my cash within my banking institution rather than sending it to an unproven 3rd party. Either way, I will be watching this closely..
I would be more interested in hooking in to the paying and calculating quarterly estimated tax payments.
Will this system do sales tax saving/payments? I pay those quarterly to my state just like the IRS estimated income payments and treat them essentially the same from a management standpoint. Any third-party system would need to be flexible to handle that, as well.
Can you go into a little detail about how well you currently cover state taxes vs. federal, quarterly payments, etc? The service I currently use doesn't really help much on the state level.
As far as quarterlies go, we pass along reminders and quarterly filing instructions currently. In the near future, you'll be able to remit payment directly from our platform.
Smart idea.
True story - our accountant sent me my personal bill last week and I had a heart attack until I remembered I have an account with cash in it specifically FOR my taxes this year. It was a "duhhh" kinda moment, but I've been so programmed as a consultant to freak out about 1099 taxes, so it was my default reaction even after spending the whole year building a solution.
that being said I have not tested all of the others, it worked so i kept using it.
More recently, I took on a regular W2 job, and I've updated the spreadsheet so that it accounts for both W2 income (and any withholdings from that) as well as 1099 profit/losses (as I enter business expenses as well).
It was all pretty easy to set up and I just update it whenever tax brackets and standard deductions change (usually an annual thing).
Does that make sense? I suppose technically just like your accountant could steal your money because they have access to your accounts there's some risk but not really.
If anything, you could make a solid case about a bank going out of business before anything. But all jokes aside, before building anything, security of funds is something we made sure our users feel really good about and we found a great partner to make sure your accounts and deposits are insured!
However, I think asking some people to change their bank accounts is going to be resisted. Also, waiting an additional 2-3 days to access your money when you're living paycheck to paycheck (as most independent contractors are) is not an option.
My cofounders and I are working on solving this same problem, however we took a different approach. (https://www.track.tax)
Track.tax creates a savings account in the user's name (same as Painless1099), but we also connect to the user's existing financial accounts to calculate taxes. Our chatbot (named Aida) communicates via SMS to ask simple questions to hash out the gory details. This means:
1. You can get paid via check, cash, or any other way you (or your clients) would like.
2. Money comes into your account first, then taxes are calculated and moved to your tax savings account.
3. Saving for taxes is as simple as responding "yes" to a text.
We'd love your feedback, and any comparison (strengths/weaknesses) you see between us an Painless1099.
Although we know solving this problem is really worth it, we'd greatly appreciate honest additional feedback from you guys, so feel free to text "HN" to TRACK (87225) and we'll give you a full year on the service!
C'mon.
My standard spiel when I'm telling people the password requirements after giving them their temporary passwords is "You're going to have to change your password when you first log in. There are 4 types of characters: Upper, Lower, Digits and Punctuation; you're going to have to have at least 3 of those 4, it doesn't like your first name, it doesn't like your last name and your password must be longer than 8 characters. I recommend selecting 2 unrelated words that you can remember, changing at least one letter in each to uppercase, throwing a digit in before, after or between them and adding punctuation somewhere else."
Looking at the "fees I wouldn't pay with 1099" I didn't read all the copy (I'm guessing 80% of us don't); I thought I'd end up paying those fees.
Might want to make it more obvious with a classic strikethrough, or something. :)
I might look into this if I go back into contracting at any point. Really cool! :)
I think as founders, we have a really bad habit of pretending out competitors are stupid and operating as if they didn't know what they were talking about. That's rarely the case in general, and certainly not the case in this instance. Tristian (CEO of zen99) wrote an awesome post mortem, which I think was just shared below, and it's been really helpful for quite a few of us in the fintech space. Continuing to read and build on the lessons that companies have learned before us is a big part of why we built the product we did as opposed to trying to replicate zen99 and hope it worked out for us. We really appreciate this thread and you guys pointing out the similarities between our companies!