I am assuming the company I am working for will submit my W-9 and inform the IRS of my wages. Is that so? If they do not submit my wages to the IRS would the IRS expect me to file and pay income tax every year even if I earned no wages or was unemployed? I am receiving direct deposit of my wages from the company I am working for currently. Would there be any proof of these wages provided to the IRS from the company I am contracting with? I have just started this contractor job in 2007 and was an employee with a W-2 until Nov of 2006. I am hearing conflicting information of persons who do not file, and those who do. This is not a moral issue I am interested on the legal and financial outcomes if I chose to not pay quarterly estimated taxes for 2007.
2007-01-22 10:18:47 · 8 answers · asked by fotostoyou 1 in Business & Finance ➔ Taxes ➔ United States
The W-9 informs the company of you SSN. It is not sent to the IRS. It does give the company the Information they need to complete a 1099. That is the form used to report the payments they made to you both to you and to the IRS. If they paid you $600 or more in any one year, they are required to file a 1099. As an independent contractor you are required to make estimated payments of both self-employment taxes (equivalent to both employee and employer portions of SSI) and income tax. If you fail to do so, you face late payment penalties even if you pay the total before April 15 of the following year. The IRS link below deals with self-employment. I recommend consulting a CPA or Enrolled Agent this year to help you setup proper record keeping for your business. After the first year, you can decide whither or not to continue using their services.
2007-01-22 10:32:54 · answer #1 · answered by STEVEN F 7 · 0⤊ 0⤋
If you just started as an independent contractor in 2007, then it won't affect the return you'll be filing now - that amount will be on your W-2.
But for next year, yes, you'll get a 1099, and it will be reported to the IRS. If you don't report the income, then at some point (and it could take a year or two) they'll send you a notice on what THEY calculate your tax on it to be, plus interest and penalties - and they won't show any expenses that you might have had that were legitimate deductions, since they won't know about those and won't care.
In addition to normal income taxes on your 1099 income, you'll be paying self-employment tax of 15.3% - this is for social security and medicare. When you're an employee, your employer pays half of this and deducts the other half from your paycheck - when you're independent, you have to pay both halves.
This year you should make quarterly estimated payments to the IRS based on what you earn each quarter. If you don't, and just wait and pay it all when you file your return next year, you'll get hit with penalties and interest even if you pay it all with your return.
If, for whatever reason, the company does NOT send you a 1099 and does NOT report it to the IRS, you're still legally required to report it on your return and pay taxes, but now we're more into moral issues unless you get caught, in which case it becomes a legal and financial issue.
2007-01-22 11:29:41 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
"Forced to file" a W-9? You do realize that that is a requirement of the IRS. If the company does not have a copy of your W-9 on file, they cannot pay you.
For 2007, since they have hired you as a contractor, they won't withholding taxes for you. You will be responsible to pay your taxes in yourself as quarterly estimates. It is not the responsibility of the company to make sure you pay in taxes, except if you are a nonresident of the US, they have to withhold a flat 30% of what they pay you and submit that to the IRS. They will report the contracting fees they paid you on a 1099, and you will need to report this as income when you do your 2007 return.
As for what happens to you if you don't pay in your estimated taxes, the tax law is that you must pay in either the lesser of 90% of your current year tax, or 100% of your prior year tax either through withholding or estimated tax payments. Since you will not have withholding in 2007, this means you need to meet this requirement through estimated tax payments. Failure to do so will mean that the IRS will assess penalties for underpayment of estimated taxes. These penalties will be assessed beginning with the first quarter that you have not paid in enough. Your Q1 estimate is due on April 15, 2007. Say you missed your April 15 payment, and got caught up when the Q2 payment is due (June 15, 2007). Then for Q2 you won't have an underpayment penalty, but for Q1 you will.
2007-01-22 10:33:12 · answer #3 · answered by jseah114 6 · 1⤊ 0⤋
They probably will report the income to the IRS and they should. If they ever got audited and didn't report YOUR income, they would be in trouble. WHEN you get a 1099-MISC, you better report the income, and the expenses that were incurred to decrease that income. You will also have self-employment tax (15.3% of the income).
BTW, they aren't "wages" if you are an independent contractor. Wages indicate that you are an employee and there was withholding. While it may seem like an anal argument, in tax law there is a huge difference.
As for ES payments, there could be interest and penalties for not paying.
2007-01-22 10:50:25 · answer #4 · answered by Dizney 5 · 0⤊ 1⤋
It must be crammed out in the previous the customer will pay you a entire of $six hundred. The payer is your customer, no longer your agency, once you're self employed. and that they do no longer sent the W-9 to the IRS, they shop it on record, and use if in the event that they provide you a 1099-misc on the top of the 365 days. If she does not have the style by using the time you hit the $six hundred mark, she's legally required to withhold a extensive quantity for obtainable taxes. And the quantity you could earn without needing to record that's $4 hundred, no longer $six hundred - it relatively is entire for you for a calendar 365 days, no longer purely from one customer. And in case you record a return for any reason, you could record se earnings from the 1st dollar.
2016-11-01 00:48:12 · answer #5 · answered by ? 4 · 0⤊ 0⤋
yes you are liable for it and will suffer penalties.
I work in one of the nations most reputable accounting firm. If our clients do not file properly they are subject to penalities dependant upon the amount owed. And yes you are correct you will only suffer penalties for the quarter not paid. However, be aware that there is interest that is due on the penalty.
FYI you can call the IRS yourself and get more detailed information of the withholding (if any) your employer took out.
2007-01-22 10:34:45 · answer #6 · answered by mailjunkie123 3 · 1⤊ 0⤋
Pay your quarterly tax. 1099 are reported to the IRS
2007-01-22 10:27:13 · answer #7 · answered by golferwhoworks 7 · 2⤊ 0⤋
just pay it because if you dont, you gonna owe the state and thats not good, also it can get you in big trouble for not paying taxes, why do you think taxes are taken out of people paycheck automatically becuase if it wasnt, no one would be paying taxes!!!
2007-01-22 10:28:04 · answer #8 · answered by Eugene 3 · 0⤊ 1⤋