NYC taxes on my paycheck, my responsibility or my employer's?

Question

I just received my second pay check and my employer says I need to do my taxes myself. How do I go about doing this and is it legal that my employer isn't doing them himself? I never filled out a W form and I get no benefits, but for a college student the pay kicks butt. I'm not complaining, just asking if this is legal. And what are my chances of the IRS noticing if I don't figure out these tax details?

Answer 1

If you're an employee, it's not legal. If you're an independent contractor then it is. The IRS has strict rules on determining who is an employee and who is not. In general, if your "employer" sets your schedule, directs how the work will be done, and provides you the location and tools to do the job then you are an employee.

You can get a copy of Form SS-8 from the IRS website and file it to have them make a determination. If the IRS rules that you are an employee, your employer will have to begin withholding from your wages and give you credit for what should have been withheld to date.

If it's determined that you are an independent contractor then YOU will be responsible for making quarterly estimated payments to the IRS using Form 1040-ES. Get a copy of the package from the IRS website. There are worksheets that will help you estimate your income and tax liability so that you can make the required payments on time. You should plan on paying in between 25% and 40% of the total income from the contracting gig. The self-employment tax alone is 15.3% on the net income and then you have to pay income tax on top of that. Don't forget New York State and NYC income taxes as well. You'll need to do the same with those!