Can someone please explain paying taxes with a 1099

[HonkIfPartsFallOff!]

My Girlfriend might have just gotten a job as a virtual assistant for a small local company. However the business owner pays on a 1099. Neither one of us has ever used this system before. Is it something you pay in one lump sum at the end of the year? weekly? how does this work?

[ironpig70]

You pay yearly. But he doesn't hold the taxes that is your responsibility. She will be an independent contractor.

[criscfer]

No you do not pay yearly, you pay your taxes quarterly.
Also expect to pay an extra 7.5%, because you will be paying all 15% of FICA not half as you do on a W2.
Technically you will not be eligable to draw unemployment when the job ends either.

[DRM]

9 times out of 10 - shitty employers use this as a way to skirt taxes.


She needs to educate herself on what an Independent Contractor is per the IRS definitions... I bet she isn't.

[Dan_E]

Tell her to take out HALF of everything she makes per year and put it away and don't spend it no matter what. She'll get socked in the nuts come tax time and not have enough to pay in if she doesn't.

Been there, done that.

[UnfrozenCaveman]

http://www.irs.gov/newsroom/article/...173423,00.html

[SilverZuk]

A 1099 is an earnings statement.
It just states who you are and how much you earned.
You report that when you file your taxes and will be taxed accordingly.'

I get 1099 from investments and contract work I do.
Nothing pisses me off the price a job as a cash price, someone pay with a check, and then 1099 me at the end of the year.

[climbit]

I am 100% 1099. you pay quarterly (every 3 months for the math retarded) 1/4 of what you will owe at the end of the year. if you don't do quarterlies, you will have to pay a penalty at the end of the year.

there can be benefits, she gets to write off all of her mileage to and from work, more expenses, etc.. but yes, she will pay all of the social security, this year it was 13.3% instead of 15%... but still annoying.

[mrblaine]

Originally Posted by DRM

9 times out of 10 - shitty employers use this as a way to skirt taxes.


She needs to educate herself on what an Independent Contractor is per the IRS definitions... I bet she isn't.

When I worked as an Independent Contractor, they could not define my hours, direct me outside the scope of the contract, or provide a work place. Any violation of those would result in them being liable for my taxes as an employer. This is CA though, so I don't know what carries over to other states.

[Schly]

Originally Posted by criscfer

No you do not pay yearly, you pay your taxes quarterly.
Also expect to pay an extra 7.5%, because you will be paying all 15% of FICA not half as you do on a W2.
Technically you will not be eligable to draw unemployment when the job ends either.

This

Originally Posted by DRM

9 times out of 10 - shitty employers use this as a way to skirt taxes.


She needs to educate herself on what an Independent Contractor is per the IRS definitions... I bet she isn't.

And this.

1099 employees are VERY different than regular employees. You are not eligible for certain state benefits if you're a 1099 employee. You have to with hold your own taxes.

I'd bet money that she's not actually eligible to be a 1099 employee. As DRM said, you should look very carefully at what constitutes a 1099 employee.

If the person is dictating her hour to hour work, she's not a 1099 employee. If he's giving her a "Project" and a "Deadline" and generally not interfering with her progress, or dictating how she accomplishes the "Project", then she probably IS a 1099 employee.

If it were me, and an employer was playing this game with all his employees, I would either A. Not accept the position, or B. Accept it and file an anonymous complaint with the Labor Board.

[climbit]

Originally Posted by schly

this



and this.

1099 employees are very different than regular employees. You are not eligible for certain state benefits if you're a 1099 employee. You have to with hold your own taxes.

I'd bet money that she's not actually eligible to be a 1099 employee. As drm said, you should look very carefully at what constitutes a 1099 employee.

If the person is dictating her hour to hour work, she's not a 1099 employee. If he's giving her a "project" and a "deadline" and generally not interfering with her progress, or dictating how she accomplishes the "project", then she probably is a 1099 employee.

If it were me, and an employer was playing this game with all his employees, i would either a. Not accept the position, or b. Accept it and file an anonymous complaint with the labor board.

bs.

[RedBullJeep]

Originally Posted by climbit

bs.

I don't know what's BS about it. With 1099's, we're responsible for paying our own quarterly tax estimates (basically the same as withholding, only quarterly instead of monthly) and our subs often qualify for 1099 status, but the general labor guys we use are not...for the basic reasons schly posted. What's wrong with his post?

[climbit]

Originally Posted by RedBullJeep

I don't know what's BS about it. With 1099's, we're responsible for paying our own quarterly tax estimates (basically the same as withholding, only quarterly instead of monthly) and our subs often qualify for 1099 status, but the general labor guys we use are not...for the basic reasons schly posted. What's wrong with his post?

a 1099 employee can have their hour-hour work dictated. mine is.

[GRMhick]

Also, if her primary income for the year comes from a 1099, unless she is a realtor, she is probably not an independent contractor.

if you work for 4 different companies on a 1099, and they each give you 25% of your annual income, and fall within the guidelines stated above, she probably is a 1099.

If she really wants the job, have her ask about being a 1099 for a 3 month 'temporary' period and then becoming a full time employee.

[Al Kaholick]

I thought it was more. We got hit with a 15.8% self employment tax on my wife's 1099 income.

Originally Posted by criscfer

No you do not pay yearly, you pay your taxes quarterly.
Also expect to pay an extra 7.5%, because you will be paying all 15% of FICA not half as you do on a W2.
Technically you will not be eligable to draw unemployment when the job ends either.

[Schly]

Originally Posted by climbit

bs.

http://barecruiters.com/irs_rules_%20for_1099.htm

The Twenty Common Law Factors – a test which may be used by the IRS:
Under the common law, a worker is an employee if the hiring firm (that is, the person or persons for whom services are performed) has the right to control and direct the way they work, not only with regard to the final result, but also with regard to the details of when, where, and how the work is done.
According to the IRS, it is not necessary that the employer actually directs or controls the manner in which the services are performed; it is sufficient if the employer has the right to do so.
1. Instructions

A worker who is required to comply with instructions about when, where, and how work is to be done is ordinarily an employee

Contractors are not required to follow instructions to accomplish a job

2. Training

Training a worker indicates that the hiring firm wants the work done in a particular way

Contractors typically do not receive training by the hiring firm

3. Integration

Integration of the worker's services into the business operations generally shows the worker is subject to direction and control

When the success or continuation of a business depends upon the performance of particular workers, those workers necessarily must be subject to a certain amount of control by the hiring firm

Contractors should not perform work that determines the success or continuation of the hiring firm

4. Services Rendered Personally

If the services must be rendered personally by the worker it is presumed that the hiring firm wants the work done in a particular way

Contractors usually have the right to hire others to do the actual work

5. Hiring, Supervising, and Paying Assistants

If the hiring firm hires, supervises, and pays assistants for a worker, that factor generally shows control over the worker

Contractors must have the authority to control their own assistants

6. Continuing Relationship

A continuing relationship between the worker and the hiring firm indicates that an employer-employee relationship exists

Contractors usually work for the hiring firm at irregular intervals, on call, or whenever work is available

7. Set Hours of Work

The establishment of set hours of work by the hiring firm is a factor indicating control over the worker

Contractors set their own hours of work

8. Full Time Required

If the worker must devote substantially full time to the business of the hiring firm, then the hiring firm controls the worker, and restricts the worker from doing other gainful work

Contractors should not be restricted from seeking and performing other gainful wor

9. Doing Work on Employer's Premises

If the work is performed on the premises of the hiring firm, that factor suggests control over the worker, especially if the work could be done elsewhere

Contractors control where they work. If contractors perform work on the premises of the hiring firm, the firm should not direct or supervise their activities

10. Order or Sequence Set

If the hiring firm sets, or reserves the right to set, the order or sequence in which work is to be performed, that factor shows control over the worker

Contractors determine the order and sequence of their work

11. Oral or Written Reports

A requirement that the worker submit regular or written reports to the hiring firm indicates a degree of control

Contractors are hired to produce a final result, and therefore should not be required to submit interim reports

12. Payment by Hour, Week or Month

Payment by the hour, week or month generally points to an employer-employee relationship

Payment made by the job or on a straight commission generally indicates that the worker is an independent contractor. Contractors may accept periodic payments based on a percentage of work completed, or some other fixed schedule determined before the job begins

13. Payment of Business and/or Traveling Expenses

If the hiring firm ordinarily pays the worker's business and/or traveling expenses, the worker is ordinarily an employee. An employer, to be able to control expenses, generally retains the right to regulate and direct the worker's business activities

Contractors pay their own incidental expenses

14. Furnishing of Tools and Materials

The fact that the hiring firm furnishes significant tools, materials, and other equipment tends to show the existence of an employer-employee relationship

Usually Contractors furnish their own tools, materials, and other equipment. If the hiring firm provides such items, they should be leased to the contractor at fair market rate

15. Significant Investment

Lack of investment in separate facilities, such as maintenance or rental of one's own office, indicates dependence on the hiring firm, and accordingly, the existence of an employer-employee relationship

Contractors should be able to do their work without using the hiring firm's facilities. The contractor's investment in their trade must be real, essential and adequate

16. Realization of Profit or Loss

Employees do not realize entrepreneurial profit, and are not at risk of loss as a result of their work

Contractors should be able to make a profit or suffer a loss as a result of their work

17. Working for More Than One Firm at a Time

The hiring firm may restrict its employees from working for another firm, such as a competitor, as a condition of employment

Contractors are not restricted from working for more than one firm at a time

18. Making Service Available to General Public

Employees work primarily for the hiring firm

Contractors make their services available to the general public on a regular & consistent basis

19. Right to Discharge

An employer exercises control through the threat of dismissal, which causes the worker to obey the employer's instructions

An independent Contractors , on the other hand, cannot be fired so long as the independent contractor produces a result that meets the contract specifications

20. Right to Terminate

Employees have the right to terminate their relationship at any time without liability

Contractors are responsible for the satisfactory completion of their contractual obligation, and may be subject to a penalty/legal action if they fail to complete the agreed upon work

The above list is adapted from IRS Revenue Ruling 87-41 Listing the 20 Common Law Factors -- Complete Text (1987-1 CB 296).

[Schly]

Originally Posted by climbit

a 1099 employee can have their hour-hour work dictated. mine is.

And what do you do? If what you're saying it true, you're probably one that's getting scammed by being a 1099 "employee".

I've done it before and it was good money, but I didn't sit there fooling myself that I was ACTUALLY an independent contractor and that the guy I was working for wasn't playing a game with the government and me.

[NoJoke]

For simplicity, compare 2 jobs - a "normal" one and a "1099"

The normal job - the employee pays 1/2 of the taxes due (what's withheld) and (most people don't know this) the boss pays the other half. Anyway, taxes are taken out.

1099 job - the boss writes a check for 100% - no taxes are taken out.

So, for you this means....

With a "normal" job you don't need to worry about tax stuff, it's taken care of for the most part.

With a "1099" you need to be good and not spend all your money - you need to save it to pay it later (the part that your boss would have withheld).

What's good about a 1099 job?
You get to work the days you want, the hours you want - as long as the job is completed in the frame of time give (essentially). If it ain't set up that way - you ain't no independent contractor (1099).

[Schly]

Originally Posted by NoJoke

For simplicity, compare 2 jobs - a "normal" one and a "1099"

The normal job - the employee pays 1/2 of the taxes due (what's withheld) and (most people don't know this) the boss pays the other half. Anyway, taxes are taken out.

1099 job - the boss writes a check for 100% - no taxes are taken out.

So, for you this means....

With a "normal" job you don't need to worry about tax stuff, it's taken care of for the most part.

With a "1099" you need to be good and not spend all your money - you need to save it to pay it later (the part that your boss would have withheld).

What's good about a 1099 job?
You get to work the days you want, the hours you want - as long as the job is completed in the frame of time give (essentially). If it ain't set up that way - you ain't no independent contractor (1099).

Right, and I can't remember the benefit, but there's some state tax that the Employer pays, like FICA or LT State Disability, that as a "contract employee" the employer doesn't pay and therefore you are not eligible for. They "the state" assume you're going to pay that yourself out of pocket. It CAN be a pretty significant deal IF you ever have a medical disaster and need it. Also, I don't think you're earning unemployment benefit credits if you're 1099, but I'm not sure.

Like I said, there are a lot of little "gotcha's" if you're a 1099 employee, so know what you're getting in to if you're going to go that route.

And "1099 employee" is an oxymoron.

[the-great-gonzo]

Originally Posted by Schly

And what do you do? If what you're saying it true, you're probably one that's getting scammed by being a 1099 "employee".

I've done it before and it was good money, but I didn't sit there fooling myself that I was ACTUALLY an independent contractor and that the guy I was working for wasn't playing a game with the government and me.

Originally Posted by Schly

And what do you do? If what you're saying it true, you're probably one that's getting scammed by being a 1099 "employee".

I've done it before and it was good money, but I didn't sit there fooling myself that I was ACTUALLY an independent contractor and that the guy I was working for wasn't playing a game with the government and me.

Same here, the money is decent, the tax stuff is a pain in the ass, but really it lets me live the lifestyle I want at the location I want.

I don't kid myself for a second that my "employer" isn't just scamming me and the .gov

for now the cost benefit ratio balances out so i'll stick around.

[FrankenToy]

Originally Posted by DRM

9 times out of 10 - shitty employers use this as a way to skirt taxes.


She needs to educate herself on what an Independent Contractor is per the IRS definitions... I bet she isn't.

When I work 1099 the employers skirt EVERYTHING except handing me a check when I invoice them. I pay the taxes (yes, quarterly otherwise you WILL have to pay a penalty) get NO health ins or vacation days or unemployment. This is the way I have reaped some of my highest pay, however, even after paying my own health ins premium. Never had a "shitty" employer while I worked 1099. I've never experienced anything wrong with 1099. Don't need any IRS definitions either, just look at the tax tables, if I made $YYY amount, I owe $XXX. It's not rocket science.

[climbit]

Originally Posted by Schly

And what do you do? If what you're saying it true, you're probably one that's getting scammed by being a 1099 "employee".

I've done it before and it was good money, but I didn't sit there fooling myself that I was ACTUALLY an independent contractor and that the guy I was working for wasn't playing a game with the government and me.

I do this:



freelance lighting designer/programmer/crew lead. I work for a number of different production companies based in socal.

typical gov't bs, making a bunch of rules and regs that do not apply in real world situations

. Instructions
A worker who is required to comply with instructions about when, where, and how work is to be done is ordinarily an employee
Contractors are not required to follow instructions to accomplish a job

If I didn't follow the instructions of my employer, things would not function and people would die. literally, I could kill someone if I didn't set-up equipment properly.

2. Training
Training a worker indicates that the hiring firm wants the work done in a particular way
Contractors typically do not receive training by the hiring firm

if a production company does not train me on their equipment, how the fuck is anyone supposed to use it?

3. Integration
Integration of the worker's services into the business operations generally shows the worker is subject to direction and control
When the success or continuation of a business depends upon the performance of particular workers, those workers necessarily must be subject to a certain amount of control by the hiring firm
Contractors should not perform work that determines the success or continuation of the hiring firm

if I do not do my job properly, the production company will not have a successful show, therefore they will not be hired again, therefore they will not be successful. in what world could the performance of a contractor not play directly to the success of a company.

4. Services Rendered Personally
If the services must be rendered personally by the worker it is presumed that the hiring firm wants the work done in a particular way
Contractors usually have the right to hire others to do the actual work

a production company hires me to program a show, how would I be able to go out and hire someone else to program for me?

5. Hiring, Supervising, and Paying Assistants
If the hiring firm hires, supervises, and pays assistants for a worker, that factor generally shows control over the worker
Contractors must have the authority to control their own assistants

I do not hire my assistants (crew) I do tell them what to do, but based upon the parameters of the show, which the production company dictates to me.

6. Continuing Relationship
A continuing relationship between the worker and the hiring firm indicates that an employer-employee relationship exists
Contractors usually work for the hiring firm at irregular intervals, on call, or whenever work is available

I work when there are shows, when there are not shows I don't work. there are a number of production companies that will only hire me to do certain things for them. there hasn't been anything signed, but its an understanding that I will make myself available for them whenever they need and in return they will call me first, within reason.

7. Set Hours of Work
The establishment of set hours of work by the hiring firm is a factor indicating control over the worker
Contractors set their own hours of work

the production company sets the production schedule. they tell me when to show up, when to do certain things, and when to leave.

8. Full Time Required
If the worker must devote substantially full time to the business of the hiring firm, then the hiring firm controls the worker, and restricts the worker from doing other gainful work
Contractors should not be restricted from seeking and performing other gainful work

I can't argue with this one I guess.

9. Doing Work on Employer's Premises
If the work is performed on the premises of the hiring firm, that factor suggests control over the worker, especially if the work could be done elsewhere
Contractors control where they work. If contractors perform work on the premises of the hiring firm, the firm should not direct or supervise their activities

I get hired often to attend production meetings, maintain equipment, work with designers/clients at the office/shop of the production companies I work for.

10. Order or Sequence Set
If the hiring firm sets, or reserves the right to set, the order or sequence in which work is to be performed, that factor shows control over the worker
Contractors determine the order and sequence of their work

not sure if or how this applies to me.

11. Oral or Written Reports
A requirement that the worker submit regular or written reports to the hiring firm indicates a degree of control
Contractors are hired to produce a final result, and therefore should not be required to submit interim reports

this also does not apply to me.

12. Payment by Hour, Week or Month
Payment by the hour, week or month generally points to an employer-employee relationship
Payment made by the job or on a straight commission generally indicates that the worker is an independent contractor. Contractors may accept periodic payments based on a percentage of work completed, or some other fixed schedule determined before the job begins

I get paid a rate per day, that rate is an hourly rate that is paid for up to 8 hours. if I have to work longer than 8 hours, OT starts at 1.5x my hourly rate. after 4 hours of that, double time starts. after 4 hours of double, triple. I have never gotten more than 2 hours of triple time, but if I had to be at a gig for more than 20 hours, I would kill someone.

13. Payment of Business and/or Traveling Expenses
If the hiring firm ordinarily pays the worker's business and/or traveling expenses, the worker is ordinarily an employee. An employer, to be able to control expenses, generally retains the right to regulate and direct the worker's business activities
Contractors pay their own incidental expenses

I do not pay my own travel expenses, I require per-diem for any gig 50 or more miles from my home, and I will be reimbursed for any expenses other than meals.

14. Furnishing of Tools and Materials
The fact that the hiring firm furnishes significant tools, materials, and other equipment tends to show the existence of an employer-employee relationship
Usually Contractors furnish their own tools, materials, and other equipment. If the hiring firm provides such items, they should be leased to the contractor at fair market rate

I bring my own tools, not my own materials.

15. Significant Investment
Lack of investment in separate facilities, such as maintenance or rental of one's own office, indicates dependence on the hiring firm, and accordingly, the existence of an employer-employee relationship
Contractors should be able to do their work without using the hiring firm's facilities. The contractor's investment in their trade must be real, essential and adequate

I have invested a decent amount of money in software, tools, training, etc, but I don't have an office, unless you count my car

16. Realization of Profit or Loss
Employees do not realize entrepreneurial profit, and are not at risk of loss as a result of their work
Contractors should be able to make a profit or suffer a loss as a result of their work

this is true, I DGAF whether or not the production company is making money, if you hire me, you pay my rates. end of discussion.

17. Working for More Than One Firm at a Time
The hiring firm may restrict its employees from working for another firm, such as a competitor, as a condition of employment
Contractors are not restricted from working for more than one firm at a time

agreed. I work for anyone who will pay my rates, I don't care if they are bidding against other companies I work for. not my problem.

18. Making Service Available to General Public
Employees work primarily for the hiring firm
Contractors make their services available to the general public on a regular & consistent basis

ok.

19. Right to Discharge
An employer exercises control through the threat of dismissal, which causes the worker to obey the employer's instructions
An independent Contractors , on the other hand, cannot be fired so long as the independent contractor produces a result that meets the contract specifications

so what they are saying is, as long as I do my job I can't be fired...makes sense to me.

20. Right to Terminate
Employees have the right to terminate their relationship at any time without liability
Contractors are responsible for the satisfactory completion of their contractual obligation, and may be subject to a penalty/legal action if they fail to complete the agreed upon work

I disagree, I can walk off a gig at any time, for any reason. I would never be hired again by that production company, or others, but legally they couldn't do anything.

[Screwzer2]

Originally Posted by HonkIfPartsFallOff!

My Girlfriend might have just gotten a job as a virtual assistant for a small local company.

So small, they'll virtually vanish! Watch out. Lots of shady scammy things with this angle. Hope its a for realz job.

If they ask her for money for ANYTHING or say she needs to buy something, tell her to run for the virtual door.