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Author: Cainhoy Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121177  
Subject: Self Employed? Date: 3/29/2000 3:16 PM
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My wife has a new job grooming dogs. She goes to the owner's shop, does the work there and receives a paycheck. However, they do not withold taxes. Is she considered self-employed by the IRS? Can I simply increase my deductions on my job's paycheck enough to cover her taxes or do we have to pay separate Social Security payments for her as well as Federal taxes? THe IRS website isn't clear in their definition. Thanks!
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Author: zebfool One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32964 of 121177
Subject: Re: Self Employed? Date: 3/29/2000 7:21 PM
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My wife has a new job grooming dogs.

Congrats. Sounds like a job on the "cutting" edge.

She goes to the owner's shop, does the work there and receives a paycheck. However, they do not withold taxes.<i/>

Do they not withhold ANY taxes or just not federal withholding? Do they withhold state taxes?

Is she considered self-employed by the IRS?<i/>

If they do not withhold ANY taxes, then yes she is considered self employed and will have to file Schedule C to report her income and expenses. She should keep track of any expenses she has related to this "business".

Can I simply increase my deductions on my job's paycheck enough to cover her taxes or do we have to pay separate Social Security payments for her as well as Federal taxes? <i/>

Yes, increasing your deductions at work is valid and even a good way to cover the taxes if they are not large. Otherwise you can pay quarterly estimated taxes. Do keep in mind, you will pay Federal Income taxes, Social Security and Medicare taxes. The Social Security and Medicare taxes are about 13%. Your Federal taxes will be based on your taxable income. For most people it is 15% or 28%. So make sure you are having enough withheld.

If you have any other questions you can e-mail me or post it here.

Good luck

Zeb and Hildegarde



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Author: TMFExRO Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32992 of 121177
Subject: Re: Self Employed? Date: 3/29/2000 10:19 PM
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<< My wife has a new job grooming dogs. She goes to the owner's shop, does the work there and receives a paycheck. However, they do not withold taxes. Is she considered self-employed by the IRS? Can I simply increase my deductions on my job's paycheck enough to cover her taxes or do we have to pay separate Social Security payments for her as well as Federal taxes? THe IRS website isn't clear in their definition. >>

The IRS website isn't clear because the law isn't clear. The employer/employee relationship is determined using the common law tests. You can get a copy of IRS Form SS-8, fill it out, and ask the IRS for a determination.

From the minimal information you provided, it looks to me like chances are your wife is an employee, but she's being treated as an independent contractor. This is hardly uncommon.

Your wife's choice is whether she wants to challenge the issue or let it be. There is a very real possibility that she will lose her job if she challenges it, especially if you live in an "at will" state.

If you decide to live with the independent contractor status, the answer you've already received gives you the information on the tax impact.

TMF ExRO
Phil Marti

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Author: RiverCityFool Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33032 of 121177
Subject: Re: Self Employed? Date: 3/30/2000 10:12 AM
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There are several tests to determine whether one is an independent contractor or an employee -- there certainly can be gray areas. Some employers would like to treat all their employees as independent contractors -- makes their accounting simpler and shifts all the tax burden to the employees.

Some of the tests (more "yes" answers indicate more independent status):

Does your wife set her own hours?
Does your wife purchase, maintain, and control the equipment she uses?
Does your wife decide how she does her job, or must she follow procedures dictated by the employer?

In other words -- who controls when and how she does her work? If the employer only says, groom x number of dogs -- and she sets the times, uses her own clippers and combs, and does the grooming her way -- sounds like an independent contractor. If the employer sets her hours, provides all the equipment, tells her what dogs to groom and how to groom them -- sounds like an employee.

Your wife will have to pay self-employment tax if her net earnings are more than $400.


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Author: Cainhoy Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33033 of 121177
Subject: Re: Self Employed? Date: 3/30/2000 10:42 AM
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Thanks to all for the replies! In her job, the shop sets her hours, books the dogs and provides most of the equipment. However, she owns her own clippers, scissors, etc.. and cuts them as requested or how she has been taught. As I told her, this coming tax year is NOT going to be easy. Sounds more and more like she's an independent contractor. I'm going that route. THanks again!

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