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Fri 23 Jul, 2004 02:51 pm
I've been offered a position with a small but very profitable company as a full time, salary employee. I'm concerned about the fact that the prospective employer wants to 1099 me. I'm not a contractor. There is nothing that I'm offering the company that he can't do himself. For all intents and purposes, I will be his employee. Even though he's willing to adjust my salary to compensate me for my benefits, I'm still concerned about workman's comp., unemployment, and audits.
As I understand it, a lot of employers avoid W2 because they don't want to pay their employee's taxes, S.S, workman's comp, unemployment, insurance and benefits. If that's the case and he does 1099 me, does that mean I have to pick up the portion that he does not have to be responsible for? Is that legal? Could he or I get in trouble for making this arrangement? How mcuh should I have my salary adjusted to account for any changes in taxes, etc.? Any information will be helpful.
Thanks in advance!!
Tell him you prefer not and see what he says. If he says it has to be 1099 and you don't have anything else maybe you should take it and keep on the lookout for something better. I'm not sure how it is in other states but in Massachusetts I believe that after a certain amount of time, maybe three months, but you should check it in your state, they have to either let you go or make you permanent. It would be in your best interest to find out.
You can be on a 1099 and still be an employee and it's legal. The laws and tax implications for 1099 employees and contractors can get really screwy so I'd suggest you talk to a CPA or Tax Atty. and get the straight poop from them.
There are also sections on Internet job sites (like Monster.com) that cover the ins and outs of being a 1099 employee and how to adjust your compensation to cover any additional benefits costs that you might end up paying yourself.
One additional reason employers like 1099 employees - you're on a contract. No messy firing and lawsuits for wrongful termination, etc.. If it doesn't work out they just don't renew your contract. (There are a lot of reasons why companies use 1099's though!)
You will have to pay your own FICA and Medicare taxes. Employees pay 7.65%. Self employed pay double that amount. You will probably also have to pay income taxes and file for estimated earnings on a quarterly basis, if not this year, then next.
As you describe the situation, it would be difficult for the employer to justify classifying you as an independent contractor, but any legal consequences will be his.
this topic is a bit old but the closest i could find relating to my question.
i was a 1099 employee in MA paying quarterly federal (MA appears to have no quarterly requirements, so they don't get anything until april 2005).
i have now been terminated. do the taxes i've been paying include unemployment insurance? ie, can i collect from MA or am i hosed? thanks!
You should probably start a new discussion, robr. For what it is worth, in New Mexico, unemployment taxes are entirely an employer burden. You would not pay them here without knowing about it. If your earnings (1099) exceeded $400.00, you will also have to file schedule SE and pay social security at the rate I mentioned above.
Wish I could answer your question, but MA is a whole 'nuther world.
1099
According to the IRS, it is not your employer's decision to make whether he can 1099 you. It's the facts and circumstances that are used to decide.
For instance:
Does your employer have the right to control you and how you do your job?
Do you work at your employer's facility and use his tools, equipment, etc?
There is a check list of 10 or 20 questions that is to be answered for this determination. As was stated above, it would be your employer that would get dinged if the IRS didn't like what he was doing. And he gets you pissed off, you can threaten to (or actually) report him to the IRS.
thats odd... its a pretty standard practice in the IT industry to have in house 1099 contractors.
Independent contractor vs employee
I suggest you read IRS Publication 15-A which explains how to tell the difference between and employee and an independent contractor.
Pjnbarb is correct. Some will keep it up till challenged in an effort to avoid the payroll taxes.
Payroll taxes and ...
Besides payroll taxes, the employer does not pay for, nor does the employee receive:
Benefits (e.g. medical insurance, life insurance)
Unemployment benefits
Workers Comp (this may well be the most expensive,
depending upon the job).
on the other hand, in most of the tech jobs ive worked in as 1099, they've paid me 75-100% more than i'd make as a full time employee. it all evens out. i just wasn't sure if the 1099 taxes i was paying included unemployment insurance. i didn't think it did, but figured i'd ask. don't want to leave any money laying on the table
.
I receive a 1099 at years end and I prefer being
an independent contractor over being employed.
I take care of my own benefits - which means I
can choose my health coverage - my retirment
account is in good hands and I'm able to deduct
a lot more from my tax returns as I would being employed,
not to mention a more generous salary in my pocket.
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