Sounds like they could make some referral cash off of referring people to checking accounts.
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.
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.
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.
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.
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.