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BFIV
Member since Apr 2012
1028 posts
| re: 1099 position - what taxes am I responsible for? (Posted on 5/1/12 at 10:20 am to drexyl)
15.3% up to the FICA cap yes. 2.9% after that for the Medicare portion.
LOL! I did not want to confuse TDSnGumbo with too many tax details. Too many taxpayers already have that "deer in the headlights" look when it comes to taxes. If someone caps out on FICA, then they are doing much better financially than most independent contractors, imho. Albert Einstein even admitted that income taxes were the most difficult thing for him to understand!
Thanks!
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frb1951
Member since Apr 2012
60 posts
| re: 1099 position - what taxes am I responsible for? (Posted on 5/1/12 at 10:20 pm to BFIV)
In addition to what others have said, realize that self employed individuals cannot draw unemployment. That's another cost your employer won't have to bear if he pays you on a contract basis. It's all win win for the employer and is usually nice for the new contractor until reality hits him at the end of the year.
I'm glad you're asking these questions now. Just keep in mind that the amount you agree to receive as payment for services rendered need to be calculated with the additional costs you will have to bear. Also, kiss any sick leave, vacations, etc.. goodbye...unless you have carefully factored all of the cons in your price. An individual health insurane policy for the first year (if you or your family have no health issues) will be a nice "teaser" rate for the first year. Don't bank on having that "teaser" rate continuing each year.
My post is based on the feeling I have that your current employer wants you to go to a contract basis rather than an employee basis. Without mentioning the fact that the situation will probably not be legal with Uncle Sam, I have never seen an employer to do this for the benefit of the employee or "out of the goodness of his heart". Proceed with caution.
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BFIV
Member since Apr 2012
1028 posts
| re: 1099 position - what taxes am I responsible for? (Posted on 5/2/12 at 7:46 am to frb1951)
Excellent information in the above post!
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ColdDuck 
LSU Fan
BR via da Parish
Member since Sep 2006
1236 posts
| re: 1099 position - what taxes am I responsible for? (Posted on 5/2/12 at 9:05 am to BFIV)
The biggest thing as mentioned earlier is the legal aspect of being a 1099 contractor. If your "boss" is directing what you do and telling you where to be and when, then you can not legally be contractor. There is a 20 question worksheet you need to review to verify. LINK
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756
LSU Fan
Member since Sep 2004
8603 posts
| re: 1099 position - what taxes am I responsible for? (Posted on 5/2/12 at 11:54 am to ColdDuck)
this - many employers mis use the 1099 contractor relationship and can be held liable.
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756
LSU Fan
Member since Sep 2004
8603 posts
| re: 1099 position - what taxes am I responsible for? (Posted on 5/2/12 at 11:58 am to 756)
keep this in mind- you get no benefits -health insur, vac sick leave, etc
no FICA match
no business expense reimbursement
the above items alone can total 40% of your salary
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Poodlebrain
LSU Fan
Way Right of Rex
Member since Jan 2004
12705 posts
 Online
| re: 1099 position - what taxes am I responsible for? (Posted on 5/2/12 at 12:55 pm to frb1951)
Don't forget worker's compensation insurance. If you are injured while working as a self-employed person, then you must have insurance to replace the lost income while you recover. An employee is covered by worker's compendsation insurance paid for by the employer.
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frb1951
Member since Apr 2012
60 posts
| re: 1099 position - what taxes am I responsible for? (Posted on 5/2/12 at 7:54 pm to Poodlebrain)
Poodlebrain,
Very good point! A sole proprietor's annual payroll figure is automatically set by the Office of Workman's Compensation....whether your actual net profit is 10 cents or 5 million. A sole proprietor can exclude himself from the policy but then has to sweat out his own health insurance plan not paying for medical bills, etc.. if hurt while working for himself.
Normally, what is covered under the workman's compensation laws are not covered under private insurance. Call and get a quote on a workman's comp policy for yourself and positively for employees if you will have any whether you work them 5 minutes a year or 5 days a week. You don't want to be without a workman's comp policy! If your employer tells you that he will cover you under his policy, get it in writing.
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TDsngumbo
LSU Fan
Member since Oct 2011
2052 posts
| re: 1099 position - what taxes am I responsible for? (Posted on 5/2/12 at 9:13 pm to frb1951)
Thanks everyone! The advice in this thread really opened my eyes and pointed me in the right areas to research. I've decided against the company for the tax reasons. The pay with the new position is not going to be worth all the time and hassle related to being a 1099 employee.
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BFIV
Member since Apr 2012
1028 posts
| re: 1099 position - what taxes am I responsible for? (Posted on 5/2/12 at 10:11 pm to TDsngumbo)
Glad all this information steered you in the right direction, TDsngumbo. I only wish that more people would take the time to ask questions before they elect to become an independent contractor. I love to see companies get busted by the IRS for abusing the independent contractor regs, but, this situation is, indeed, a two edged sword in that if the company gets busted, so does the independent contractor who, although well intentioned on his own part, can suffer catastrophic tax consequences. I've seen truck drivers, nurses aides, car detailers, satellite dish installers, etc. file tax returns as an independent contractor when they should be classified as an employee. And they have ALL become angry when made aware of the IRS rules and possible financial, tax, and benefit consequences of having pay reported on a 1099-Misc instead of a W-2. Of all the comments in this thread so far, I did not, to the best of my knowledge, read any post by anyone (employer) that defended this sometimes blatant disregard for IRS regulations and rules. Interesting indeed.
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