Your Tax Question - 046

Dear John, I just received a new job and the company is classifying me as a 1099 employee. They have informed me that I will need to save up 15% of my income in order to pay for the these taxes at the end of the year. What gives? Thx, Charlie

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Thanks for the question Charlie,

Some companies classify their employees as 1099 contractors in order to not have to pay certain employment taxes. The IRS is wise to this and they are more than happy to tell you if you are indeed an employee of the company or a contractor. Simply fill out and submit IRS Form SS-8 for the determination.

If the IRS does indeed inform you that you are a W-2 employee and not a 1099 contractor they will have to change the way they treat your paychecks and you will have to fill out Form 8919 with your 1040 for this year. According to IRS Pub 15 employers are always liable for the employee portion of the taxes and add a (ahem) special bonus to the tax for employers who do it wrong.

I hope this helps.

John

PS. Look at the countdown timer just under the header, time is getting short and I am able to help. This year I am only charging $69.00 for new clients that I service as their tax accountant. Can you say "CHA-CHING!" ?