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Author: spl241 Big gold star, 5000 posts Top Favorite Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121587  
Subject: 1099 "Misc" Question Date: 2/25/2012 9:01 AM
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Daughter is a website monitor making $12K and got a 1099 Misc from her employer. No tax, either Fed or HI state, was withheld. Q: the employer calls her an "independent contractor" and according to DD, seems to feel they are exempt from withholding tax on her pay. Is the employer right? Can't DD request withholding via a W-4. She/I felt that if you receive a 1099, you had the right to ask for WH. Anyone??
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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115222 of 121587
Subject: Re: 1099 "Misc" Question Date: 2/25/2012 9:19 AM
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Daughter is a website monitor making $12K and got a 1099 Misc from her employer. No tax, either Fed or HI state, was withheld.

And she's just now noticing? If she hasn't yet received any pay, shame on her for staying. If she got paid without any withholding, shame on her for not noticing. I'm hoping she's quite young and just now venturing into the workplace. Lesson 1: Pay attention to your paycheck!

Q: the employer calls her an "independent contractor" and according to DD, seems to feel they are exempt from withholding tax on her pay. Is the employer right?

It's a facts and circumstances question. IRS Form SS-8 has the 20 common law questions to answer in making the determination. Work situations can be designed to be either independent contractor or employer/employee, but the time one deals with that is at the beginning of the work relationship. The paperwork (if everyone's behaving properly) is a clue. IC's give the hirer a W-9. Employees give the employer a W-4.

Your first step is to determine whether or not this is truly an independent contractor situation. Get back to us when you've reached your conclusion, and we'll offer options from there.

Phil
Rule Your Retirement Home Fool

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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115223 of 121587
Subject: Re: 1099 "Misc" Question Date: 2/25/2012 9:49 AM
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Daughter is a website monitor making $12K and got a 1099 Misc from her employer. No tax, either Fed or HI state, was withheld. Q: the employer calls her an "independent contractor" and according to DD, seems to feel they are exempt from withholding tax on her pay. Is the employer right? Can't DD request withholding via a W-4. She/I felt that if you receive a 1099, you had the right to ask for WH. Anyone??

==========================

If she is an independent contractor, she'll have to pay both sides of SS & medicare. To me, that's a bigger gulp than income tax on 12K.

Jean

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Author: YewGuise Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115224 of 121587
Subject: Re: 1099 "Misc" Question Date: 2/25/2012 11:12 AM
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...IRS Form SS-8 ...
http://www.irs.gov/pub/irs-pdf/fss8.pdf

I looked through it, and it's quite detailed. Although some cases fall into grey areas, the general concept is:
- For part-time, summer, or other temporary situations, it's OK (and common) for the worker to be an IC (independent contractor). My kids both got 1099-misc's from some of their summer & holiday jobs.
- If the worker freelances for more than one employer, s/he's an IC.

So, in general, if a worker is full-time and permanent with one employer, s/he should be an employee, not an IC. Sometimes businesses, to save money, bring in workers as IC's when they should be hiring them as employees. This is illegal. More info:

http://www.irs.gov/newsroom/article/0,,id=173423,00.html
http://www.irs.gov/businesses/small/article/0,,id=99921,00.h...

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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115226 of 121587
Subject: Re: 1099 "Misc" Question Date: 2/25/2012 12:38 PM
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- For part-time, summer, or other temporary situations, it's OK (and common) for the worker to be an IC (independent contractor). My kids both got 1099-misc's from some of their summer & holiday jobs.
=======================================

I'm guessing you are not in Washington State. Here people, even kids, are required to be employees or have a business license. One exception is paper delivery people.

One of the most frustrating audits I ever had was by State Industrial. They went through every check. If a check was made out to a person they wanted the payroll records or their UBI (Business license number). We had a lady come and clean every other week. They didn't fine us but insisted that she be put on payroll, since she didn't have a business license.

I'm not sure how they work IC's that come in from out of state. There is no income tax, so they wouldn't be paying tax to the state on the income they earn here.

Jean

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Author: YewGuise Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115227 of 121587
Subject: Re: 1099 "Misc" Question Date: 2/25/2012 1:43 PM
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I'm guessing you are not in Washington State.

Maryland.

Here people, even kids, are required to be employees or have a business license.

Wow.
In both instances here, the employers' CPAs gave them the green light to use 1099's, so I think all was OK on that end. On our end, per your previous post, the kids did submit the Sched's C and SE with their 1040's, so there was that additional expense. Not a problem for them, as the jobs were more for experience than income, but for an adult it would be a different story. Typically an adult who agrees to work as an IC also negotiates a higher hourly rate to compensate not only for having to pay both sides of SS/Medicare, but also for the lack of benefits.

We had a lady come and clean every other week.

Not sure if you mean home or office, but hiring domestic help is complicated. One reason I went with MiniMaids, or Merry Maids (or some company; I forget which because it's been awhile) to clean my house, instead of "a lady," is that the company would take care of insurance, taxes, benefits, etc; whereas with an individual all that paperwork would be my responsibility, and I wasn't interested in doing all that.

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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115231 of 121587
Subject: Re: 1099 "Misc" Question Date: 2/25/2012 3:50 PM
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It's our lack of income tax that does it....or rather the desire of the state to collect Business and Occupations and sales tax.

We do hire ICs once in awhile, but have to make sure they have a WA State business license. We haven't tried to hire one from out of the state.

The cleaning lady was for our store.

Jean

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