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Posted by jpkiser2 on April 13, 2008, 9:32 pm
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I took a job agreeing to be paid by 1099. My spouse doubled up his
withholding to cover mine, but, not understanding the ramifications of
1099 pay, I now have a tax bill of about $8000. My question is
this...do I have to show 1099 pay as my own business. Or can I just
treat it like a W2 and not pay all that self-employment, medical and
social security?
thanks in advance for any advice!
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Posted by Ernie Klein on April 13, 2008, 11:08 pm
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In article
jpkiser2@comcast.net wrote:
> I took a job agreeing to be paid by 1099. My spouse doubled up his
> withholding to cover mine, but, not understanding the ramifications of
> 1099 pay, I now have a tax bill of about $8000. My question is
> this...do I have to show 1099 pay as my own business. Or can I just
> treat it like a W2 and not pay all that self-employment, medical and
> social security?
I am sure you will get a lot of advice from tax professionals (which I
am not), but your subject is a contradiction in terms. You cannot be a
"1099 employee". You are either an employee who should receive a W2 and
have all taxes and SS withheld, or you are a self employed independent
contractor who receives a 1099 and pays his/her own tax and SS. You
can't be both at the same time.
The IRS has many rules as to who is an employee and who is a contractor,
but generally a person is an employee if the employer can control what
will be done and how it will be done. On the other hand, the person
hiring an independent contractor has the right to control or direct only
the result of work done by an independent contractor, and not the means
and methods of accomplishing the result. In other words a contractor
manages himself and an employee is managed by the employeer.
The IRS has a list of questions on their web site (irs.gov - just search
for independent contractor) or use this link for more info:
http://www.irs.gov/businesses/small/article/0,,id=115041,00.html
Because businesses often take advantage of employees and misclassify
them as independent contractors to avoid paying their share of the
taxes, the IRS takes a dim view of those practices.
If you feel that you have been misclassified you can file a SS-8 form
(Determination of Worker Status for Purposes of Federal Employment Taxes
and Income Tax Withholding) to request that the IRS make that
determination for you.
If you have been misclassified you may be able to treat the 1099 as a W2
and the IRS may go after the employer for the back taxes.
I am sure other will give more information.
--
-Ernie-
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
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<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
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Posted by Dick Adams on April 14, 2008, 1:51 am
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> I took a job agreeing to be paid by 1099. My spouse doubled
> up his withholding to cover mine, but, not understanding the
> ramifications of 1099 pay, I now have a tax bill of about
> $8000. My question is this...do I have to show 1099 pay as
> my own business. Or can I just treat it like a W2 and not
> pay all that self-employment, medical, and social security?
- What is your position?
- What is your employer's industry?
Both are significant issues in determing the ethics of your
contract!
- How many other people in this company are in a similar
situation?
- How difficult will it be for you to find another position?
Both are important issues in determining your options!
Keep in mind that you do owe 50% if FICA and Medicare.
However, your employer has underwithheld trust funds.
If my understanding is correct, that is a 100% penalty!
Answer the above and I and others will lay out your
options for you. Do so quickly.
Dick
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by jpkiser2 on April 14, 2008, 9:01 pm
Please log in for more thread options On Apr 14, 1:51 am, rdad...@panix.com (Dick Adams) wrote:
> - What is your position?
> - What is your employer's industry?
> - How many other people in this company are in a similar situation?
> - How difficult will it be for you to find another position?
>
Keep in mind that you do owe 50% if FICA and Medicare. However, your
employer has underwithheld trust funds. If my understanding is
correct, that is a 100% penalty!
>
> Answer the above and I and others will lay out your
> options for you. Do so quickly.
>
> Dick
I'm sorry for such a delay in checking back, I had a stressful day of
doing other business' tax calculations! Yes, that's my business,
calculating the retirement plan contributions for employers! You
would think I would have had a better understanding of my own
situation.
To my knowledge there are 3 "employees" working as independent
contractors from our homes. (Though I now understand I am using the
wrong terminology by calling us employees - thanks Ernie!!) There are
about half a dozen doing similar job, but work full time at the
office.
I looked at the list of 20, and for the most part, I agree that I'm an
independent contrator. And since I'm the one who agreed to this
position, I definately do not want the company penalized in any way.
So I guess I just need to suck it up and pay these taxes.
I'm guessing I need to plan better for 2008 also...yikes! Thanks to
both of you for your help, though!!
Annie:)
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Dick Adams on April 14, 2008, 9:52 pm
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> I looked at the list of 20, and for the most part, I agree
> that I'm an independent contrator. And since I'm the one
> who agreed to this position, I definately do not want the
> company penalized in any way. So I guess I just need to
> suck it up and pay these taxes.
I disagree. This is a negotiation issue. You need to
discuss this with your employer. You need a $4,000
bonus right now to cover their end of FICA and Medicare
PLUS a 17.5% increase in your rate. You were never made
aware of or you never understood the ramifications of
your contract.
If you can find other employment, delay filing your
return, but pay your end of FICA and Medicare while
you look for another job. When you file as a W-2
employee, the IRS will almost certainly agree that
you are a W-2 employee and your emploment will be
terminated.
Dick
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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