Which one is better when paying taxes?

Question

work for a firm called "Axa Advisor" I started working recently. My company told me that they will pay me on 1099 and I can deduct taxes later.. They told me that I need to collect all the receipt. Does that mean that I send my original receipt to the CPA later? or a copied version? My company also told me that I cannot deduct taxes if I am on payroll.. Which one is better? Being paid on payroll? or being paid on 1099?

Answer 1

Being on payroll is better.  Getting a Form 1099 means the company does not pay your Social Security of FICA.  The cost to you is over 15 percent of your money.  An employee pays 7.65 percent.  

It is correct that getting a Form 1099 you can deduct your expenses.  You will need to take the receipts into your CPA so he can prepare your return.  You will also need to keep the receipts for at least 3 years in case the IRS audits your return.  Also your account will have to file a Schedule C and Schedule SE for you.  This will add to the cost of your CPA charges you to prepare your return.

Visit the IRS web site at www.irs.gov and download Publication 17.  There is a lot of good information in this publication and it will give you other publication numbers for more detailed information.  Publication 17 can be found in the forms section of the page, left side near the top.

Hope this helps

Answer 2

This means you don't know which way is up.  They are treating you as a self-employed person who will be responsible for paying both halves of social security and making sure you save enough to cover income tax and have health insurance because you won't be covered by workers compensation if you are injured on the job or unemployment insurance when you get laid off.

If the employer can do anything more than dictate what the finished work product is like, they have enough control to be liable for employment taxes.  This means unless you are paid by the contract, not by the hour or week, can come and go as you please, do the work whenever you want, hire your own helpers, get paid enough to cover all your expenses and have the potential to make a bigger profit or suffer a loss, you are an employee.  The employer can't just wave a magic wand and make it different.

You should complete IRS Form SS-8 to get a ruling on your status. If IRS rules you are an employee and you show the determination to your employer, you may be fired immediately but you will have plenty of ammunition to get unemployment.  

Answer 3

You can't deduct federal income tax, social security or medicare if you are on a W-2 OR on a 1099.  On a 1099 you end up paying almost twice as much for social security and medicare, since the company isn't paying it's matching amount for what is deducted from your pay if you are an employee.  If you are an employee they would also have to pay for workers comp for if you get hurt on the job, or for unemployment if you get laid off - with a 1099 they don't pay those, and you aren't covered if you get hurt or laid off.

Paying you as an employee or not is not optional, legally - they aren't allowed to just decide, and you aren't either.  It depends on the conditions of your employment - see http://www.irs.gov/businesses/small/arti... - basically if they set your work hours, place of work, and work rules, you are an employee, not an independent contractor.  If you get paid a flat amount for doing a job, and can do it wherever and whenever you want to as long as it meets their deadlines and their quality requirements, then you are more likely an independent contractor.  You don't give enough info about what you are doing for them for anyone to say which you probably are.

Answer 4

What they are doing is most likely illegal and intended to cause you to pay taxes that they are responsible for.  Ask them if you have a supervisor.  If you have one you are an employee.

Answer 5

You need a new job, and you need to drop a dime on these people.  What they are doing is illegal.  There are very strict laws about who can be paid on a 1099 and who cannot, and a lot of small companies try to get around them.  It's NOT up to them, and it's NOT up to you!

This can get YOU in trouble.

Answer 6

if you are getting paid on a 1099 you better be getting 3 to 4 times what an employee doing the same thing would be getting.

this would mean you are an independent contractor and YOU are responsible for ALL your taxes and workers insurance.  Since you will be doing that work too you need to be compansated for it and of course you need to collect a higher wages to cover those costs.

many employers try to pull a fast one over on workers with this one.