My new job says I have to take out my own taxes, is this legal?

Question

I just got hired at a debt settlement company, they are new, just moved in to a building. The interviewer told me we have no benefits right now and have to take our own taxes out, but later it would change. I will be working 40 hrs a week 8-5, mon-fri.
I just wanna know if this is "illegal" in some way or is the company trying to get out of paying other taxes that pertain to its employees. I dont know much about this but I thought it was suspicious. Should I take the job?

Answer 1

{EDIT} "Who is an Independent Contractor? A general rule is that you, the payer, have the right to control or direct only the result of the work done by an independent contractor, and not the means and methods of accomplishing the result." {/EDIT}

The employer could be viewing you (who can use whatever means and methods necessary to collect debts) as a consultant (by controlling or directing the result of the work done - collecting debts) and give you a 1099-Form rather than a W-2. If you were an employee, the employer would take the taxes out via a W-4 form. If you were not asked to complete a W-4 form, you are not an employee.

If he gives you a Form 1099 every pay period, you are responsible for paying your own Federal & State Taxes as well as Social Security - the full 15.30%.

The higher wages are a consequence of deducting your own taxes.

Answer 2

Legally if you work with employer in certain fixed time schedule, and you have to sign your In and out daily, you have to be employee with wages and the employer should have taken fed, soc, md, state tax's. Employer should also match the soc tax. Beside this employer should pay the unemployment insurance for both Fed and State. And you may have to be covered by insurance plan. But, those employers who try to save little bucks, and also those employees who want to have all payments without tax's, share the reason why this way of hiring became big item. If you are self employee where the employer will issue you 1099, you are not employee, have no such unemployment, no benefits, any time the employer may let you GO home. Check with your employer and find if you are employee, or self employee. Both have different regulations and obligations. Dig to know that.

Answer 3

It sounds like you are an employee since they set your work hours and provide the place for you to work. Therefore what they are doing is NOT legal. They are trying to avoid paying payroll taxes and saddle you with extra taxes to boot!

I would not accept the job personally. If you do, download Form SS-8 from the IRS website and file it as soon as you start. This will get the ball rolling on the determination that you are an employee and that the employer MUST withhold taxes.

Answer 4

The interviewer told you that you have to take out your own taxes, but later it would change? If you were a contract laborer (temp help) or considered self employed and working under this company ( ex: real estate salesperson), there would never be a "later." The arrangement wouldn't change.

I would be highly suspicious of this company since the company, by having you pay your own taxes, isn't withholding taxes and not interested in paying their share of your social security tax. If you are a salaried employer, they must withhold and pay the employer's share of your social security tax.

This sin't the only issue you should be worried about. Since money seems to be scarce with this new company (no benefits and you pay all your taxes), they might not have the money to pay your salary. Everything seems rosy now, but the company could be out of business with no pay to you and no advance notice.

Answer 5

If you have other options, you should not take the job. A person who is expected to work a 40 hour week is an employee. Your employer is required to pay his share of payroll taxes. Sounds like they are not prepared to do this...they have no money. It is suspicious, and it is illegal.

Answer 6

Give it a pass. There are jobs where you can legally be an independent contractor and have to deal with taxes on your own rather than having them deducted - but it would be highly unusual for that to be the case for an 8-5 office job.

Read this for a definition of employee vs. independent contractor - if you're an employee, they legally have to withhold taxes. http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

Answer 7

This sounds suspicious to me, however it could be perfectly legal. Yet, your employer must pay your Social Insurance from your pay. This is not paid by the Employee, but by the Employer. Also, depending what Province you live in, will determine how much tax you would pay. For example, if you live in Quebec, you must pay both Provincial and Federal taxes. If you live in Alberta, you pay only Federal.

Answer 8

It is my understanding that if they do this, you are being hired as a contractual person and being paid like someone who owns thier own business. In this situation, if they tell you what hours to be there and treat you as they would an hourly employee.....they could be in trouble with the IRS. I've been in this situation before and it turned out to be trouble. You have to be able to submit quarterly taxes like businesses do. And if YOU do it wrong....you are in trouble with the IRS. I ended up wishing I never did it. If you venture to do this...I'd at least contact an accountant.

Answer 9

They're expecting you to act as an Independent Contractor, which means you will not only have to pay your own income tax, but your own employment/medicare, etc. taxes...the stuff your employer usually pays.

Basically, you'll be self-employed, and they will be your client. Honestly, it's a huge pain in the backside, and it's only making their life easier. I'd keep looking.

Answer 10

If you are working for them in the the capacity of a INDEPENDENT CONSULTANT then the answer is yes.

Check out the following website for additional background.
http://management.about.com/cs/adminaccounting/a/ICtaxes062397.htm

Also try a google search using "consultant taxes"