1099 employee?

Question

My son recently got a job (managing a small restaurant) and the owner said he is going to be treated as a 1099 employee. I assume that means he's some sort of independent contractor, and is responsible for his own withholding of income taxes and self-employed social security and medicare, but am not familiar with the details. What taxes is he responsible for and how does he and/or boss remit?

Is the social security 15.3% or is it something less than 2x for a "self-employed" person? HOw does he remit, ie who send it to and with what form?

Answer 1

Wayne and Judy are both correct. But to add to the mix.

How is your son being paid? and does his boss actually plan on issuing a 1099 to him (I would doubt it)

If he does get a 1099, then he would also be able to write off the cost of business. That would include travel to/from work.

A concern that I would have is that he does not have workers compensation. If he gets hurt at work, he would not be covered, and would have to sue the employer.

Answer 2

Wayne is correct that the owner doesn't just get to decide whether to pay him as an employee or as a contractor.

That said, if he works on a 1099, he'll pay 15.3% self-employment tax in addition to whatever income taxes and state and local taxes are due on the amount of income he makes. The 15.3% is for social security and medicare - if he was working as an employee, half of that amount would be deducted from his paychecks, but the employer would pay the other half.

Answer 3

First of all, your son's boss is breaking the law. You can not just decide that someone is an 1099 contractor. In fact, the phrase "1099 employee" is a contradiction in terms. The boss is avoiding paying unemployment taxes as well as his share of social security. Your son should demand to be put on the payroll and have all required taxes withheld. He could also file an SS-8 with the IRS and have them determine whether he is an "employee" or an "independent contractor". Doing this will probably get him fired.

If he does not want to do this, he will be responsible for paying federal and state income taxes as well as self-employment taxes on his net income. This could run up to 40-50% of his net. He should also start making quarterly estimates.

Answer 4

if a person works for other person it is up to the boss to take out taxes on his wages .if he works as a independent subcontractor then it is up to him to save money to pay for his taxes.