By changing to 1099misc. status, am I considered self-employed?
2006-12-21 05:55:30 · 6 answers · asked by Jodie G 1 in Business & Finance ➔ Taxes ➔ United States
The IRS has rules on who is considered an employee and who is considered an independent contractor (self-employed) - the employer doesn't just get to decide which way to pay you. You can find a summary of this information at http://www.irs.gov/businesses/small/article/0,,id=99921,00.html
If you're a contractor, you'll pay both the employer and the employee portions of social security, so will pay 15.3% instead of having 7.65% deducted from you pay, with the employer paying the other half - so unless you're getting a raise with this change, you'll be taking a 7.65% pay cut. You'll also be resonsible for paying your own taxes by filing quarterly estimated returns.
2006-12-21 06:17:58 · answer #1 · answered by Judy 7 · 2⤊ 0⤋
The real question here is are you an employee or an independent contractor. If you are considered an employee, then he must withhold income and FICA taxes (your part and the employer's part). If you are an independent contractor, then you may get a 1099. Read the back of the 1099 when he gives it to you. It will give you a number to call if you think you are actually an employee, not a contractor.
2006-12-21 17:39:38 · answer #2 · answered by Dave 3 · 0⤊ 0⤋
Yes. And you pay more taxes because instead of your employer paying half your social security tax you pay the whole thing. You would be able to deduct business expenses against your income (which would help a little with the increased SS tax but would almost certainly not offset it). You would be able to sock away money in a Keogh plan to reduce (but not entirely) the additional tax burden, assuming of course you have the money to sock away. Assuming you're relatively new to the working world, this is almost always bad for you. Don't do it if you don't have to.
2006-12-21 14:01:20 · answer #3 · answered by Rose 2 · 0⤊ 0⤋
Your employer shouldn't do this. They are trying to pass their FICA tax liability on to you and also avoid paying unemployment tax.
The IRS rules are pretty cut and dry with this. If they set your hours and provide you with the items you need, you are an employee and should be treated as such.
2006-12-21 14:08:29 · answer #4 · answered by Wayne Z 7 · 1⤊ 0⤋
yup. Keep all receipts for your tax purposes- travel, educational material, business meals, and just about anything else you can think of to write off.
2006-12-21 13:58:42 · answer #5 · answered by Northville 2 · 0⤊ 0⤋
Judy is as right as rain.
2006-12-21 16:07:38 · answer #6 · answered by Anonymous · 0⤊ 0⤋