New 1099 Employee....Freaking out!?

Question

I am very new to this; I am going from a large corporation where I never had to think of this. But I have accepted a job with a corporation out of NY. I am the only employee in California. I receive Medical and Dental and was under the impression that my responsibility was to pay my part of the taxes on my own...............Fine, I can do that no problem. But I am being told that the Company will not be paying their half of FICA or SS or Unemployment since I am 1099. I feel like I am getting the shaft here. Can they do this if I am an employee not under contract or limited term? I was told they are doing this because they are not set up in California as an employer, but why would that stop them from paying half of the fed taxes on the employer side? I have an appointment with a CPA, but that is a week away and I am having trouble keeping my worries at bay. Any help would be appreciated.......Thanks

Answer 1

As a 1099-G means you are independent and responsible for all your taxes including FICA and SS. But here is a piece of advice for you. Just because you are a 1099-G if your employer treats you like an employee this whole independent status goes out the window. They cannot have there cake and eat it too. If you are required to be at work at a certain time and required to work up until a certain time, specific days, and finally from a specific location you are not an independent consultant per FLSA guidelines. 1099-G contractors make up there own days and hours. If you do not have this freedom you are not an independent contractor. You ARE an EMPLOYEE. The fact they are not set up in California as an employer is moot. Means nothing. They are headquarted in New York, but also conducting business from an office in California. There problem to report this to the IRS and a number of other institutions not yours. You are being shafted and the only person who will lose here is you. Remember we are accumulating points to collect SS benefits when we reach retirement age. More importantly, if they decide to let you go they believe they will not have to pay you unemployment (although based on everything I told you they will have too.) If you can do not take this job unless they are going to continue treating you as an employee which sounds as if this is the case. If they have not set themselves up in California as of yet, again not your problem theres.

Answer 2

If you are an employee, then they would pay half of your social security and medicare.

If you are working on a 1099 then you are NOT an employee and you would pay both halves.

Their being set up in CA as an employer or not has nothing to do with whether you are an employee - frankly, that's their problem. There are specific IRS rules on whether you are an employee or an independent contractor - see http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

Hard to tell from your question which you are, since you don't give much info about the job itself. If you are outside sales for example and control your own working hours and conditions, then you are probably an independent contractor. If you are opening an office and working by rules that corporate sets up, then you are most likely an employee. The fact that they are providing medical and dental benefits kind of sounds like you're an employee - those aren't normally given to independent contractors, and if it's under a corporate plan, probably wouldn't even be able to be.

Good luck.

Answer 3

Sounds like they are treating you as an independent contractor. Here is the IRS.gov link which compares employee to contractor status: http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

How much the company can control when and how you work is one of the major components of whether you are an employee or an independent contractor. Either way, if you like the job, complaining too much about the contractor status may make the company reconsider using you to do the work.

Be aware, the company will probably send you a 1099. You will be responsible for paying the approximately 15% for social security and medicare, plus regular income tax. Be aware, if you don't send enough each quarter, there are penalties and interest.

Answer 4

A 1099-MISC is for reporting income. It doesn't have anything to do with interest payments. - if you received a 1099-MISC from your finance company, it would be an error. It is all $0, you don't need to get it fixed, because it's saying there is no income related to it. Since vehicle interest is not a tax deduction, there shoud be no 1099 given. - if you got one, call your finance company and ask what the 1099 is for. Add'l Info: So now that you have the paperwork from them, why don't you call them back and ask to go through the billing with them, so they can see where they are wrong, or you can understand why they are right.

Answer 5

The company does not have an obligations to pay any taxes when a 1099 is used, you however will need to and the IRS could even require you to make quarterly payments. The 1099 is a federal form and if the state of california chooses to use it they can but they do now controll any part of the federal tax obligations. Advice contact the IRS for help.

Answer 6

A 1099 employee does not have their FICA or SS or Unemployment paid on their behalf. If the company was registered in California, then you would be a full-time employee and the company would take care of those taxes. So you are basically self-employed now and should discuss your responsibilities for paying taxes with your CPA.

Now, the argument could be made that you should be treated as a regular employee. If you are only working for this one company and they are directing your day-to-day activities, then you are in essence their employee and not a contractor. But you have to decide if you want to rat your employer out to the state and get them in trouble for not registering in the state.

Answer 7

You are being issued a 1099 because you are not an employee of the company. They have classified you as a subcontractor (independent contractor). You're responsible for the FICA, SS, Unemployment, and SDI.

Answer 8

As many have already mentioned, you'll be responsible for your share of taxes (SS, MC, & income taxes).

What I would say, however, is that if the corporation is paying for your medical & dental insurance, ask them to give you a summary of their payments. It is likely that they will add this portion to the final amount of the 1099-MISC. If this is the case, you can deduct the medical & dental paid on your behalf. Altho the money didn't hit your pocket (in or out), you can deduct it if they considered it part of your income and paid it in your name.

Good luck.

Answer 9

as an indepedent contractor - you are responsible solely for your taxes - it's like you were runing your own business. This negates their responsibility on it.

However - it also puts you in the drivers seat - since they can't tell you how you conduct your business and so forth. If they start telling you you have to work during certain hours, and so forth - then you are under the guidelines of an employee - and this makes them liable and conducting fraud.

In the meantime - stop freaking out - I spent 2/3 of my professional career as an independent contractor - now I am an employer.

Set aside 30% of your commissions/pay each check into an interest bearing account, and quarterly, file your tax liability.

That way you are always covered, and at the end of the year, you'll have money in the account left over and of course a possible return depending on your deductions that you need to keep meticulous records of.

Answer 10

speak to the accountant for the company that is 1099ing you and write down what he says. Then present the info to your accountant and see what your options are. I 1099 one empolyee who works for me and I pay half of FICA , SS,etc..