Self employed v employed but receiving a basic wage?

Question

I know all the different checks to see if someone is self emlpoyed or employed and this person is pretty much deemed to be self employed, BUT they receive a basic salary as well as commission.

How does this affect things?!?!?

Answer 1

If taxes are being withheld on the salary amount (federal, social security, medicare, state) then that part is already taken care of. For the commission, if there's no taxes being taken out, then the person would be responsible for paying Self-Employed (SE) tax on the commission earnings (net of any expenses) at year end.

Answer 2

f they are getting a paycheck with taxes taken out, then they are being treated as an employee. But if they just get a check for the gross, they're being treated as self employed.

The basic pay and the commission will be taxed the same. At the end of the year, they'll show the total amount (from a 1099, their own records, or a W-2) on their tax return to calculate taxes owed.

If they are self-employed, the will fill out a schedule C or C-EZ with their 1040, and also a schedule SE. Since a self-employed person doesn't have taxes withheld, they should file quarterly estimated returns and payments to avoid penalties at the end of the year for underwithholding.

Answer 3

It is possible to be an employee and also a self employed independent contractor at the same time. For example, a tax preparation service might pay a tax preparer a fixed dollar amount per hour just to come to the office and sit around waiting for walk-in business. When they actually prepare a return they also receive a commission. The fixed wages get shown on a W2, and the commission is shown on a 1099MISC.

Answer 4

if they are self employed, then the basic wage as you call it can be called a retainer for his/her services as part for the contract, assuming they have one. you can always re word the contract to the effect that they will be paid a basic retainer and commission will be paid on sales etc.. over a certain amount.

is any tax or NI deducted from this amount?

if there is, then its employed full stop, the IR wont argue but will just say employed.

Answer 5

You are self employed if you work for yourself and pay yourself. You can pay yourself anyway you wish, a weekly salary a commision etc, it does not matter. There is no grey area for being self employed, either you are or your not.

If you are receiving your income from another party, you are not self employed but an employee.

Answer 6

Not as commission--- wages-- --... The business does so well they can now give them selves wages a check every week or 2 weeks... The account figures out all the details the business owner knows a lot and can help curve certain events that may not be profitable... Does not effects things...

Answer 7

you can be both, eg: work full time but also do freelance work in your own time.