help with 1099 and tax?

Question

Currently, I am paid by the hour, lets say $10/hour. If I work 80 hours, the total is $800, before tax and deduction, which includes federal tax, Medicare, social sec tax (No state tax in Florida).
For example: 800 – 80 (fed) – 8 (med) – 48 (social) = take home of $664

Now, lets say I was offer $10/hour as a 1099. How would the numbers work out?

Would my take home be $800 and pay the same amount ($136) of tax at the end of year? Is this correct? Did I miss any thing?

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waggy_33 mention about "workers compensation insurance". What percentage is that? 1% 2% ...
If the employer does not pay it, do I have to pay it?
Same goes for employment tax? cost and who pays it.
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Answer 1

All things being equal your after tax dollars as a self employed individual will be less because you will be apying both halves of the social security and medicare tax. This is 15.3% verses the 7.65% paid by employees. In adddition you will not be covered by the employers workers compensation insurance nor will he be paying enemployments tax on your behalf.
Not a good deal all things being equal.
The worker's comp insurance is based ona percent of payroll of the employer. They get a group rate for you to do the same will cost much more.
As a self employed individual you will not be able to get state unemployment insurance. This cost to an employer ranges rom .08% to 6.2% of payroll. You would have to replace that with a private income continuation policy which will be much more expensive.

Answer 2

You would be able to deduct all valid expenses connected with the cost you incurred to make the money. In the case of an inside the office type worker it would not be much, but outside sales people would benefit a great amount. Gas to and from your job is not deductable in either case, so you would have to have expenses that are not covered by your employer. You would not have to have Fed. & St. income taxes withheld, which would give you the use of your money each month instead of letting the government keep it for upwards a year plus before you could get any refund back. Also, by being 1099 you would have to pay double for medicare/aide and social security, (it is actually a little less). You would also benefit from not having to pay for unemployment taxes, so you could ask your employer for that additional amount as you are saving them that percentage. If you run your own business, even a large one, it is usually best to take a small salary or none, and the balance as a 1099. In this manner you can live out of your business some. Example, let your company pay for your car, with pretax income, which would net you around 25% plus more each month. It works best for you to let the company own other major items and do the same. You would only have to claim the portion that you use the car or item for personal use. In some cases you can write it all off, especially if it is a second vehicle, home and a boat or RV. It is all in the codes, look them up on the IRS web site.

Answer 3

You will pay more tax, everything else being the same. As an employee your employer pays half of your Social Security and Medicare taxes and you pay half. If you were self employed, you'd pay the whole amount. Therefore your SS and Med tax liability would double.

There are other considerations as well. You would not benefit from Workers Compensation laws. If you were injured at work, the medical bills and loss of income would be entirely up to you.

If you receive any benefits from being an employee (insurance, vacation, sick pay, etc.) those would also go away.

Lastly, if you are self employed you must budget for and make quarterly estimated payments of your taxes to the IRS and the State.

You normally will be worse off all the way around as self employed unless you can at least double the gross pay you received as an employee. Tripling your pay would be better.

Answer 4

Yes you missed a bunch. 1099 Misc box 7 income will result in a schedule c. The good part is that you may deduct from that income any allowable expenses used to make the money. The bad news is there is no withholding. You pay the tax plus DOUBLE Medicare and Social Security.

Answer 5

Your take home will be $800, but because there was no withholding during the year 2006, you will have to pay tax now, and Social Security & Medicare will also be deducted. And because it is treated like a business, you are allowed to deduct allowable expenses incurred while doing the job. which will definitely help greatly in reducing your tax burden.

Answer 6

You'd pay an extra 7.65% in tax, since you'd pay the employer's share of social security and medicare as well as the employee's share that you are paying now.

You might be able to deduct some of your expenses.

But if it's the same job, then it's either self-employment or a job as an employee - you, and/or your employer, don't just get to choose. There are rules that determine which you are, based on job duties.

Answer 7

W-2: Gross 800.00
FWT (80.00) = 10%
MED (11.60) Oops you made an error
SS (49.60) Oops you made an error, again

Take Home = $ 658.80

Med is taxed @ 1.45%; SS is taxed at 6.2%

1099: Gross 800.00; Take Home 800.00.

Refer to Circular E (irs.gov) 10% is a good estimate; but, refer to the tables and look for your marital status on $ 800.00 per week, one allowance or exemption - the amount should be around 15%. Net Effect of Self-Employment Tax is 12.6%.

Taxes Due: 80.00 + 100.80 (800.00 x 12.6%) = $ 180.80, Oops you're off by $ 44.00.