1099 tax form?

Question

Just got a job and found out instead of w-2 they have us fill out 1099 forms....then they told us because of this, we will pay less taxes, instead of being taxed at about 30% of our pay which is about normal, we will be taxed at only about 15%, and at the end of the year there are numerous write offs and deductions....but when researching it, i noticed that a lot of people are actually paying more taxes using 1099 form (self employed) because they have to pay what the employer didnt....

if this is the case why did they tell us that u will be paying less taxes because the government is making money because of our sales so they give us a break??? are they lying or what

basically my question is this..in a month, someone who makes $3000 would normally get taxed around $750 using w2

how much would they get taxed using 1099?? thx

Answer 1

It is possible to pay less tax as an independent contractor, but only if you have substantial expenses related to the work. If you have transportation expenses, equipment, supplies that you pay yourself, those amounts can come off your gross profit from your contracting work.

But if this is a job without a lot of expenses connected with it, you will pay more tax as an independent contractor than you will as an employee. This is because in addition to income tax, you will pay double the Social Security and Medicare Tax that an employee pays.

If you accept this job, keep very good records of all your expenses to minimize your taxes.

Answer 2

You don't file a 1099. The employer would send you a 1099-Misc for non-employee income (if your income is over $600). This would then be put on a Schedule C (subject to self employment tax), unless you have a company, then it would be put on the return for the company. The 1099 is sent to the IRS (just like a W-2 is) so the IRS has a record of it. Keep track of your expenses for this business since some of them may be deductable. You may want to see an accountant when it comes to filing your tax return if you have more questions.

Answer 3

You are considered to be an independent contractor .
You can use any expense used for this job as a tax deduction . Travel , telephone , cell phone , computer ,
internet , clothing , business cards , ect .
After the deductions , you will have to claim the resulting net profit and pay self employment taxes and income tax on that amount . You need to find an accountant or a tax professional to help you find the proper deductions and how to utilize them .

My wife was making $3000 per month and ended up paying $130 per month in taxes .

Remember , if you are a w-2 commuter , your commuting expenses are not deductible . However, if you are 1099 contractor , your travel to their office is deductible as auto expenses .

Answer 4

They lied to you through their teeth! As a self-employed independent contractor YOU will pay MORE tax! THEY are the ones who are getting the big tax break!

Income taxes are largely a wash either way though as an IC you may be able to deduct some costs that you wouldn't be able to otherwise. However you will pay double the Social Security and Medicare taxes. In a years time that will cost you an extra $2,700 in taxes. They will save quite a bit more than that as they will not pay other payroll taxes for unemployment tax nor will they have to provide workers comp insurance since you're NOT an employee.

Since taxes are not withheld from you pay, you must make quarterly estimated tax payments to the IRS using Form 1040-ES. At your income level, you'd owe about $3,600 in Federal Income Tax plus about $5,400 in Self-Employment Tax annually. You'd need to make quarterly estimated payments of about $2,250 to have enough paid in at tax time to avoid a large tax bill plus penalties and interest for underpayment of taxes.

Consider filing form SS-8 with the IRS to have a determination made on your employer vs contractor status. Here's a link: http://www.irs.gov/pub/irs-pdf/fss8.pdf You will nearly always be better off (and pay less tax) as an employee rather than a contractor. Most "employers" use this as a tax dodge and my hunch is that it will be getting MUCH closer scrutiny by the IRS over the next few years.

Answer 5

What you can do is make payments to the IRS.

But I have used a 1099 for many years and it is not different than using the W-2.