Anyone work off a 1099?

[djh3]

Well I have an offer to go to work for a fellow. It is as a contractor on a 1099. Last time I work that way I seem to remember paying way to much to the government for my liking. Pay is pretty decent when you look at gross, but last time year end was awful writing that check. Employer mentioned about an S Corp and an advantage to setting one of these up and paying yourself thru it? When I did a look see about this, best I could cipher it would cost me the same amount either way. Any experience guys?

[Hummingbird]

As best I can ascertain, there are no benefits to working on a 1099 except for the contractor himself. You will probably need to provide liability ins. which in most cases amount to a million plus and of course there are absolutely no benefits to you. ie: workers comp, insurance, vacation etc

[MiCarl]

With an S-corp you could potentially treat some of the income as profit rather than wages. The part that was profit wouldn't be subject to approximately 15% payroll tax. Of course doing that could reduce your Social Security income in the future.

 

If all you were doing with the S-corp was splitting off earned income as profit I think the IRS would take a dim view of that. You'd definitely want some input from a tax professional before doing anything that even looked like that. Also, there are some costs in setting up the S-corp.

 

There might be an advantage to the 1099 route. As a 1099 employee you might not have to pay unemployment tax, as an S-corp you definitely would.

[cecdoo]

Put 20% of your pay in the bank, when tax time comes your covered. Also keep records of all travel and expenses, mite be a good time to sell any stocks you took a hit on. When you have more income, ya need more deductions.

Craig

[BlueSky]

You have to pay the SS for yourself and what your employer normally pays for you as I understand it.

[djh3]

Checked with an tax guy today. S corp is basically a tax dodge to keep from paying SS. Well I might want that here in a few years. Actually thats part of why I am looking to change at this time. current job pay is like 1200 month after tax. I'm in my last 10 years of working the IRS looks at to set your social security. This other job would be 2400 a month pre tax. Of course its 40 hours a month more working also. Neither has insurance, vacation or 401k

[videoarizona]

I worked self-employed for the last 20 years of my career in video/audio production. Many times I worked for others under 1099's. No problem, just made sure to declare that income as the 1099 is supposed to go to the IRS by the employer...and pay my own ss. The only issues I had to keep aware of was keeping my "self-employment" status clean...ie...allowing the employer to tell me what to do but not how to do it. This was I kept my independent contractor status clean with the IRS. When the powers to be tell you how to do the job, you now become an employee in the eyes of the IRS. The employer and I made that distinction at the outset. Never had a problem with IRS or employers...

[MiCarl]

Checked with an tax guy today. S corp is basically a tax dodge to keep from paying SS.

 

An S corp is a legitimate way to organize a business. It's often used to form businesses that have a small number of owners. Many of the small businesses you interact with will be organized as S corporations. Its advantages are that it's simple and inexpensive to set up, has a simple governance structure and avoids double taxation of business earnings.

 

I'm not a tax guy but I suspect the key standard the IRS looks for is that the corporation is engaged in business. Businesses have customers (generally more than one customer), buy and sell goods and services, buy or rent facilities and equipment, hire and pay employees etc. If the IRS were to look at your corporation (S or otherwise) and it appeared to be a wrapper around what otherwise would be considered a job you could be in a world of hurt.

 

By the way, all those taxes you're required to pay yourself are due in the quarter the money is earned. Put off paying it until your annual tax filing and you will likely get hit with interest and penalties.

[djh3]

I get "the rules" of a contractor. Problem is for this type job it really is hard to stick to. If say I have to take a car to race track for support for day and track opens at say 8am, I have to be there ahead of that and make sure car is ready to go by 8am. If at shop and it opens at 8 closes at 5 thats kind of when you have to be there. Cant harley say whats my work for tomorrow ahead of time and say its only going to take me 6 hours so I'm sleeping in.