Independent Contractor...not really self-employed?

Question

I work as an independent contractor as a medical transcriptionist from home. I am not really self-employed. I just work from home for a company out of state. I have a 1099 form and a W2 from this company, as I switched from employee to IC status last year. My IC pay is under $10,000.00 and over 30% was taken out of this. My husband received a $10,000.00 bonus through work any they only took out 25%...what gives? Why such a difference?

Answer 1

The 1099 is the amount of income from your days as an IC, while the W2 shows the income when you were an employer. You will need to fill out the forms associated with self-employment to pay your SS on the IC earnings.

It's important to remember that firms withhold taxes based on information that you provided on your W4 and based on IRS requirements. Your tax liabilitiy has no direct relationship to the amount withheld. Your liability can only be calculated by filling out the forms.

Sounds like you might benefit from using a CPA. He or she will also give you some good advice on setting up a retirement account as an IC, and also deducting expenses associated with your IC business.

Answer 2

If you are an independent contractor you are self-employed. If you are an employee for the company you work for, it's a different matter. It sounds like you were an employee at one time but now you're self-employed (as a legal matter). Normally taxes are not withheld from money paid to an independent contractor, unless the contractor has not provided his or her social security number (not the case here).

When you file your taxes, you should receive back any money that was withheld that you didn't owe, but keep in mind that as an independent contractor you are responsible for paying 15% of your income (up to about $80K) for FICA (which is social security, etc.) This is not the same thing as income tax. Normally an employee pays 7.5% to FICA and their employer pays the other 7.5%, but as a contractor you're responsible for both halves.

You'll need to include a Schedule C with your tax return, and you'll have to use form 1040 (not 1040A or EZ) because of being a contractor. It's a big pain in the ***.

Answer 3

First off, it's a 1099-MISC, not a 1098-MISC. There is no 1098-MISC. Secondly, independent contractor and self-employed are two terms for EXACTLY the same thing. Whatever you want to call it, you show your business income and expenses on Schedule C to figure your net profit. If the net profit is $400 or more, you attach Schedule SE to figure your self-employment tax. I have no clue what you are doing but you can't file as "self-employed" or "independent contractor" and get different numbers because the two are the same thing. Most self-employed folks owe when they file, so if you are doing it one way and are coming up with a large refund, you are messing up badly. I'd strongly urge you to get professional assistance since you obviously don't know what you are doing.

Answer 4

An independent contractor has to pay 15.3% self-employment tax on their net earnings, as well as normal income tax. You might not consider yourself self-employed, but if you're working as an independent contractor, the IRS does, since social security and medicare haven't been paid on that income - that's what the self-employment tax is for.

You say "took out" - did the company you work for deduct it on your 1099? That's unusual, but nice if they do - saves you having to file quarterly estimated payments.

Answer 5

If you are an independent contractor, you are self employed. Don't forget the 15.3% self-employment hit.

Employers have tables or software that they use to calculate withholding. Amounts will differ based on the format they use and how many exemptions you claim.