I called my last jobs accountant today and was told I got a 1099-MISC form for $550 which represents bonuses. I never recieved bonuses for this amount. I did do teaching in the jewelry store and made and sold pieces to the store - but was always paid from the owner on business checks. I assumed I was paid as an employee but now they are implying I was an independent contractor - which isnt true. I did all the work in the store and never invoiced for anything. What do you think is happening here and what should I do?
2007-03-05 14:23:40 · 5 answers · asked by JB 2 in Business & Finance ➔ Taxes ➔ Other - Taxes
On days I made high sales the owner would write me a bonus check for $50. It was from her personal business account not from her accountant who did the payroll. There were no deductions at that time - but I don't believe I was running a business. I worked for her and earned the bonus.
2007-03-05 16:48:31 · update #1
The 1099-MISC you received was for the "bonus" amounts your employer was giving you from her personal account. There were no taxes withheld on this income.
Since the amount is under $600, you are not required to report this income.
2007-03-05 20:04:20 · answer #1 · answered by tma 6 · 0⤊ 3⤋
Sounds like a number of things were done wrong here, that bad records were kept. Did you also get a W-2 from this store? If so, then any "bonus" amount should have been included there.
If your main job there was teaching classes, and making and selling jewelry to the store, then it very possibly is accurate to classify you as an independent contractor. The jewelry that you made and sold to them would seem to be a business of your own - the fact that you made them while you were in the store probably isn't relevant.
If taxes weren't deducted when you were paid, then rightly or wrongly, you weren't being paid as an employee.
If the $550 doesn't include ALL of the money you got from them, for teaching, for items you made, and for these "bonuses", then it should, and you're responsible for showing the TOTAL amount on a schedule C.
As to the 1099, there is a variety of wrong advice posted for this question. The company would not HAVE to issue a 1099 for amounts under $600, but they are allowed to. And if you are filing, then you have to report ALL income, including this 1099. And if you made over $400 self-employed or as an independent contractor, then you are required to file.
2007-03-06 05:25:36 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
If your employer paid you a bonus and issued you a 1099 for it, while you were working as an employee (W-2), he made a mistake. Bonuses while working as an employee are subject to Social Security, Medicare and Federal Withholding, and should have been reported on your W-2.
An employer made a mistake. But you did too. Did you ask any questions when you received the bonus? Did you ask whether taxes were taken out? You could have
resolved the situation at the time the bonus was received.
Now, unfortunately, you have no option. You must report the bonus as Schedule C income, pay 12.6% of Social Security and Medicare, and then pay federal tax based
on your marginal rate.
The only remedy you can ask from your employer is to reimburse you the additional cost of you paying Social Security on the bonus. That amount is $ 22.00 in your case.
$ 500.00 divided by .9235 = $ 541.41 x .0765 = $ 41.00. $ 500.00 times 12.6% = 63.00
You would have had to pay the Federal tax anyway.
I dont think $ 22.00 will break you - dont bother asking your employer for it.
2007-03-06 06:43:25 · answer #3 · answered by bold4bs 4 · 0⤊ 0⤋
I don't know about the $600 thing, but if I were you I'd ask to have it added to my w-2 as part of my salary. This is because if it is a sizeable bonus the extra taxes on it could put you in a bind at the end of the year. You see you will not only have to pay income taxes on that money but also half of the medicare and social security tax. Basically your employer is saving themselves some paper work by filing a 1099 misc. If you can't get them to change this you will have to file a Schedule C for business income. These are expensive forms to have an accountant or Tax pro fill out.
2007-03-05 18:15:15 · answer #4 · answered by vtownowl1 1 · 0⤊ 1⤋
First of all they should not issue a 1099 unless it is over $600. You don't have to issue an invoice in order to rcv a 1099. If you were paid by way of business check, did they withhold any taxes? If not then you can be issued a 1099 but only if its over 600. GL
2007-03-05 16:19:05 · answer #5 · answered by plbrgrl 1 · 0⤊ 1⤋