I have a question about filing taxes for commisson workers.?

Question

I just started a business and I was told that if I pay my employees on commisson that I wouldn't have to pay taxes on them and that I would just have to fill out a form saying how much I paid them. If this is true what form is it and if it isn't then what do I need to do?

Answer 1

Uh, no, you were told wrong.  If they are employees, you DO have to withhold taxes, you can't just give them a 1099.  If you set their hours of work, where they work, and what they do, and they work at your place of business, they are employees.  If they are independent sales people and you are paying them on commission and they set their own hours and conditions of work, they are probably contractors, not employees.

Download publication 15 from irs.gov for info on what your federal requirements are.  There are state requirement also - those will vary depending on where you are.

Answer 2

It does not matter how you determine the pay, if they are employees you will need to register with the IRS and your state. You should be withholding federsl and state income tax, social security tax and you should be paying state unemployment tax and workers compensation insurance.

Answer 3

Small business owners frequently make the mistake to thinking that they can avoid employee taxes by making everyone an independent contractor.  I frequently tell clients that those folks you call independent contractors will one day claim up a ladder and fall off.  By the time they hit the floor they will be employees. They will be sue you because you did not have workers compensation insurance and the will file a claim with the IRS and local labor board for the back employee taxes you should have paid in the first place.

Answer 4

This might be true in some countries, but not all.

You should ask this question in one of the country specific "categories" in the country is one one of the following:

Argentina

Australia

Austria

Brazil

Canada

France

Germany

India

Indonesia

Ireland

Italy

Malaysia

Mexico

New Zealand

Philippines

Singapore

Spain

Switzerland

Thailand

United Kingdom

United States

Vietnam.  

If the country is not one of those, you should identify the country by name in your question.