Is there any truth to what I was told that self employed sub contractors don't have to pay taxes?

Question

Is there any truth to what I was told that self employed sub contractors don't have to pay taxes?

Answer 1

No truth whatsoever.  Never listen to they.  A self employed person actually pays more out of pocket as you get the whole 15.3 % FICA tax to pay yourself just for starters.

Answer 2

Nope.  You actually have to pay more.  Maybe what you heard is that the employer doesn't withhold taxes from your weekly/monthly paycheck - that is true.  But now you have to forward your money to the IRS directly every quarter.  And you have to pay both your share and the employer's share of Soc Sec and Medicare taxes.

You will have to estimate what your taxes for the year will be and forward 1/4 of that amount every quarter to the IRS and to your state.

You need to read up on the subject a little:

http://www.irs.gov/businesses/small/arti...

http://www.irs.gov/businesses/small/arti...

http://taxipay.blogspot.com/2008/03/w2-o...

Answer 3

Only if they break the law.  Taxes might not be deducted from 1099 income, but they would owe taxes, and would usually have to pay estimated taxes quarterly (depending upon income).  Last quarterly payment is due Jan 15th after the year ends, and there is an underwithholding penalty (with only a few exceptions) if you owe more than $1000 when due at April filing deadline.

Answer 4

Definitely not.  And you end up paying more than if you were an employee, since you pay both the employee and the employer portions of social security and medicare.

Answer 5

People who hire self-employed sub-contractors don't have to pay taxes.  The worker owes income tax and both the employer and employee halves of Social Security and Medicare.

Some employers deliberately misclassify and therefore cheat people who should be employees as subcontractors so they can avoid paying Social Security, Medicare and unemployment taxes as well as workers compensation insurance.  If the worker is required to be at work particular time, is paid by the hour, use the employers tools and equipment and follow orders, he should be treated as an employee.  If he is just told what needs to be accomplished and when and but has control over the rest of the process, he will most likely be a subcontractor.