how does 1099 work ?

Question

my new employer in NY, saying that i will get 1099 for first 3 months. and i mention that I dont know how much i will get per week after I pay tax at the end of the yr... then they told me that they can withhold the tax and pay me what I actually get for now. but i dont know how this works ?
can they hold the tax first if i am getting 1099 ? isnt that I am the only can file 1099 at the end of the yr ? say if they hold the tax for me just like what W-2 does . then what I will need to do at the end of the yr ? ?

Answer 1

If they give you a 1099, then you are being paid as an independent contractor, which may or may not be legal depending on the circumstances. There are cases where federal withholding tax is taken out and reported on the 1099, but not state tax or social security. You wil be responsible for both the employee and employer share of social security at the end of the year, which is about 15.3% of your net pay. One benefit of working as an independent is you can deduct business expenses on Schedule C and half the social security wil also be deductible. One disadvantage of working as an independent is you might get surprised by a big tax bill at the end of the year and as an independent, you won't be covered under the employer's disability or worker's compensation insurance.

Answer 2

What they are trying to do makes no sense and isn't legal. A job is either as an employee or as an independent contractor - if you're going to be doing that job after 3 months and be an employee, then the job doesn't qualify for you to be a 1099 independent contractor for the first 3 months.

That said - it's something some employers do, even though it's not legal. You'd end up owing the same taxes either way except that for the time on a 1099, the employer wouldn't pay their employer taxes so you'd pay twice as much social security and medicare, and would not be covered for unemployment comp, or by workers comp if you get hurt on the job.

Answer 3

What they are saying is they want to screw you over for three months then maybe do it right.

I have canned explanation to apparently clueless independent contractors who get 1099s:

Some employers try to get around paying employment taxes (social security and unemployment) and other employee benefits like workers compensation insurance by improperly classifying employees as independent contractors. If you are required to show up for work--personally--at a particular time, punch the clock, use the employers equipment and are paid an hourly rate, you are an employee. If you didn't understand the difference when you posed your question, I would be even more convinced that you are an employee. What is your preference, Slotted or Phillips? Complete an IRS Form SS-8 to get an official ruling on your status. This will help you get unemployment if you get fired. When you file your income tax return, you can attach Form 8919 Uncollected Social Security and Medicare Tax on Wages and only pay the employer's half of social security. You will still have to cough up all the income tax.