Hi there, I am in dire need of some solid advice regarding taxes. Hopefully the reliable cf folks can offer some sage info. This is about as serious as I'm going to get on clutchfans, and for good reason too. About a little over a year ago, I switched my job. I am still currently employed at said job, however my boss has given me the 1099 form this past week, with $22,777 in Nonemployee Compensation(from research, I understand this is considered 'contract' pay). Now I am 21 years old, been working since 16, and I have always received W-2 from my previous employers. With this 1099, I was a little baffled, I did not know how to deal with this. Typically, I have always just handed my W-2 to my mom and she then takes it to the tax people and weeks later I get a refund check, simple and painless. But it seems that this 1099 is a bit more complicated. First, let me lay out my employment details, just to clarify that I am not a contractor. I am employed by the owner to come in to work 40 hours a week, 9am-5pm Monday-Friday. I perform my job tasks everyday, which includes answering phone calls, filing paperwork, collecting delinquent payments, plus numerous other small business tasks. Now this is a very small business, to be discreet due to me still being employed by this company, I will not disclose any specific information, but overall this is just a mom and pop company and I was hired to help out with the office tasks, kind of like a secretary , plus to supplement the need for an English speaker due to them not being fluent in the language. When our customers pay us, all payments are made payable to the company name, none to me, therefore I do not consider myself to be qualified for Nonemployee Compensation. I obtained the job through the classified in the newspaper, I called and interviewed for the position, and was hired on the spot. During the interview, my boss said that I will be filing my own taxes, I just nodded and didn't think much of it. Now, fast forward to Saturday, when I received a letter from the IRS... with a Nonemployee Compensation Total of... $6,480.00 I DO NOT HAVE THE MONEY FOR THIS. I am working for piss poor money and trying to go to school part time, I DO NOT HAVE MONEY FOR THIS. Without bringing the shadiness of my employer into this(guess I just did), I think he screwed me over. On Friday I spoke to him regarding the 1099. He sat down with me and attempted to crunch some numbers to reflect how much I would have ended up paying if he deducted taxes from my paycheck month to month, which didn't make any sense when he said 15% deducted for medicare(WTF?), and said that if he did deduct taxes from my paycheck, it's going to total over $5000 anyway and it doesn't make much difference. Then he claims that I will be able to deduct the net total down from $22,777 to about $15,000 and I should only have to pay taxes for the $15,000. I had no idea what he was talking about, he said I can calculate the mileage used to commute to work and purchasing a PC for this 'contractor' work to lower the net total. But all my work are performed on equipment supplied by my employer, from the desktop to the printer to the phone to the internet and everything else that is involved in office work. So I guess my question is... What can I do to have my boss take responsibility for a portion of the taxes that I have to pay? I get paid only $10.50 an hour and I am not about to pay 3 months of my salary for taxes, this is absurd. I went to some website suggested on yahoo answers, and I had it calculate how much was to be deducted from my paycheck if my boss were to cut the taxes out, and it totalled to about 19.12% which includes 11.47% for Federal Taxes, 6.2% for Social Security, and 1.45% for Medicare(which is not even a shadow of what he claimed). Salary Paycheck Calculator Your Pay Check Results Bi-weekly Gross Pay.........$850.00 Federal Withholding..........$97.50 Social Security................$52.70 Medicare........................$12.33 Texas............................$0.00 Net Pay..........................$687.47 Well so, I need some advice, any insight will help, I am a total ditz about these tax issues, I should have taken an accounting or economy class or something... Anyway, Please help me out yall, I don't have $6000+ to pay for this, I don't even have half that... I'm just a college kid working full time and trying to make ends meet, this is a total inconvenience at a very bad time. I seriously haven't slept well since receiving the 1099 form, because I feel I'm in some serious doodoo. What should I say to my boss to have him take responsibility(some of) for this bill? What should I do to prevent future tax issues? If I complete a SS-8 form, will the IRS enforce my boss to take responsible? What is my employer benefiting from paying me Nonemployee Compensation instead of claiming me as an Employee and deducting taxes from my paycheck? Has anyone ever been through this? What did you do? Can someone recommend some professional help? I wouldn't mind paying some money to a professional tax person to help me through this issue. I sincerely, from the bottom of my heart, appreciate any and all help that you can assist me with. Good night and sleep well, 'cause I won't.
I assume that over the past year, you received $22,000+ in paychecks and never had any deductions taken out? Does the $22,777 he listed as your income coincide with what you earned?
If you're a 1099-MISC employee, no taxes are withheld from your paycheck - so you were getting extra-large paychecks this whole time. The tradeoff is that you have to pay all employee and employer taxes yourself at the end of the year. This includes: Federal income tax Employee share of payroll taxes (Medicare, Medicare) Employer share of payroll taxes Compared to being employed normally, your extra tax burden is the last one - which is about 7.6% of your total income. But the problem is that you have to pay it all at once instead of having it taken out over time where you don't notice it as much. If you are paid as a 1099-MISC employee, it's ultimately your responsibility to save a portion of your income for the tax bill. That said, you'd need to speak with an attorney on exactly what your legal options are, but from the way you describe your job, it doesn't sound like you qualify as a contractor, and you should have been paid as a W2 employee. Employers aren't allowed to contract out people that don't fit the criteria. That said, you weren't paid that way, and I don't know if you can go back and "undo" that part of it. At the very least, you'd owe the full share of federal income taxes and the employee share of payroll taxes - this is all the stuff that would have been deducted had you been getting paid properly. An attorney would be able to help you properly, but it may come down to suing the employer or something like that if you want to fight it. On the flipside, as a 1099-MISC contractor, you can write off any expenses you may have had to produce the income - as you mentioned, gas to get to and from work, any purchases you had to make for your job, etc. You can get a little more info here: http://www.irs.gov/businesses/small/article/0,,id=99921,00.html
Holy crap this brings back memories! I was in the same boat in 07, for tax year 06... in fact I'm wondering if it wasn't the same company because our stories match up almost 95%. I too worked 40 hrs for a small mom and pop company. Anyway, when it came time to file my taxes I discovered I had to owe around $2,500. I didn't do too much research, but I was able to find out through some tax firms and offices that what the company did was illegal. Basically if you're working 40+ hrs at an actual work environment, then it's obvious it's not contract work. Some small companies do this to avoid paying their portion of the taxes. Well there's some form that you can download from the IRS website that will have them investigate the company and the government will then go after them for the other half of the bill. Granted, whatever relationship you had with them will suffer, but at least you won't be footing the entire bill. If you go this route my suggestion is to call up places like Jackson Hewitt, H&R Block, and some law firms that deal with this kinda stuff and get details. The other option is just to suck it up and pay the IRS. You can go on a payment plan, and pay whatever you can afford in installments. I did this because I was also pretty good friends with the people at the company, and I didn't want to get them into legal trouble or have my relationship with them suffer. Either way, you have a huge bill to play. So good luck.
This link actually may be more helpful: http://www.irs.gov/newsroom/article/0,,id=176666,00.html It gives some options for people who feel they are misclassified.
Yes it does. Is there a way to calculate what my share is and what my employer's share is? I did not make any purchases for my job, except driving to and from work. All equipments were provided by my employer.
Federal income tax is complicated, but the payroll taxes (SS and Medicare) - the employee burden is 6.2% SS and 1.45% Medicare of your income that you mentioned. The employer burden is the same amount. Basically, with a W2 employee, the employer and employee each pay half. If you're self-employed or a 1099-MISC, you have to pay both halves. There may also be an unemployment fund tax or something like that in there, but I'm not positive how that works - if there is, it's tiny. Employers have to pay that for W2 employees, but I don't think that extends to 1099 contract labor.
If you have a 1099, you should have many deductions. car, gas, oil change, entertainment, travel, healthcare, clothing, phone, internet, computer, etc... You may even deduct low enough that you won't need to pay taxes, and even get income credit. Of course, you would need to be prepared and save all the receipts.
Man, my little brother is in the same boat. He worked as a contractor for most of last year and got a 1099-MISC form in the mail last month. His non-employee compensation is $3721. I am trying to help him out with filing his taxes but I have no idea whatsoever what that means. Does it mean he owes the government $3721? If so, he won't have the money to pay it back. He has not even done $10000 worth of paychecks from his employer as he has worked less than part time. I tried asking him for receipts but he told me he does not keep any receipts for purchases and stuff, but he does pay for almost everything with his credit card. Would that qualify as a receipt? I don't want him to take out a whole bunch of deductions or personal expenses only to get audited and not have individual receipts for the listed expenses. Is there an accountant here that can help us with this? What would be your advice in his case?
Also is the due date for the 1099-MISC earlier than the rest? I just read online that I should have sent one of the copies to the IRS by the end of February with an accompanying Form 1096 (what the heck is that?) Crap!
Maybe they should have informed you better, but if they're paying you and not deducting the proper taxes, its on you to pay your share. I own trucks, so the company pays the truck and I pay my drivers, but they get a 1099 and have to pay their portions as I have to. With the money you have described, I would say 15% is what you will owe. You can put in in installments if you don't have it right up front. After that, if you continue to work and get paid, you can do quartely estimates based on what you make.
No, he does not owe the government $3,721. The $3,721 that is listed on the 1099 should be placed on Schedule C, and he will have to pay the associated self-employment taxes. No, that will not qualify as a receipt. What kind of contractor is your brother? Since your brother received the 1099, he doesn't need to worry about the 1096. The purpose of the 1096 is to inform the government how much money (where no tax was withheld) was paid to individuals (the 1096 and 1099 have the same information). The information on the 1099 will be included in your 1040 in Schedule C and the 1040 is due by April 15th.
Your simplifying this way too much. Its true that he'll be able to take deductions, but its nothing like what you described. He can only deduct business expenses. The only way that he can deduct his car would be if it were used ONLY for business purposes. And even if it were, it would need to be depreciated. Based on the original post, it doesnt sound like this is the case. For automobile purposes, all he can deduct is his mileage (I think its 58.5 cents per mile for 2008) and any parking expenses. I'm not exactly sure what you mean by "income credit". Could you explain this in greater detail?
But I don't have any deductions... I was not informed during the interview to save my receipts to BS on my taxes... And even so, I don't want to cheat on taxes. From my original post, an amount of $152.53 should be deducted from every paycheck I received, and because I get paid every 2 weeks, that totals to $5491.08 per year in taxes taken out of my paycheck, which is still a full $1000 shy of the total billed to me by the IRS, not to mention I would eventually get a refund check at the end of the year. Now, I have no issue paying taxes, I have no problems paying my share of the taxes if my employment status was handled correctly. I have no problem paying the $5491.08 right now and wait for a refund check. I need to have my employer take responsibility for snaking his way out of his share of SS & Medicare taxes plus whatever else he may have saved by labeling me as a Nonemployee Contractor. Because when sht hits the fan, I know for sure they rather terminate me than pay for this. For sure I will contact a tax advisor as suggested by earlier posts, but I would really like some more help regarding what to do in order to have my employer pay his share of the taxes. I am NOT a contractor, my employer labeled me as a contractor to save himself some tax money. I don't really want to hear "you should be able to deduct a lot of expenses", when in reality, I didn't have any expenses.
Make sure you deduct 50% of your self employment taxes. http://www.irs.gov/businesses/small/article/0,,id=98846,00.html
Royals Ego, In your original post, you said that during the interview, you were told that you'd be filing your own taxes. You also said you nodded and didnt think much of it. In other words, you agreed. Also, it sounds like you didn't fill out a W-4. And during the course of the year, you didn't notice that your paystubs indicated that nothing was being withheld. IMO, the only way to force your employers to pay for their share of the medicare/SS taxes would be to get a lawyer involved, but this might not be the smartest thing to do. Lawyers cost money and you'd probably end up losing your job, and with it, any future references. Have you considered bringing the situation up with your employers? Get the paperwork straightened out (so you're classified as an employee for 2009) and maybe ask for a bonus? Or a reimbursement check? And btw, if you drive to work, then you do have business expenses.
