nativetexan

I interviewed for a job. They told me it's Contract work. Then told me I would have to apply for my own business license. They will pay me and i will be responsible for my taxes and SS and Medicare, etc.
The IRS frowns on people doing things that they set rules on differently.
has anyone done this??
my husband and I usually file jointly and i'm still paying back SS for early filing (i was being laid off) and i'd already made too much the first qtr of that year and have been paying SS back since then. They stop taking money out of my cks next October.

Nanamoms

Not sure of current IRS regs but what they are doing is sub-contracting work out to you. They don't have to pay matching SS or carry workmen's comp so it saves them $$. You will simply have to file under your SS# and then on your tax return, you will calculate the correct SS, etc. It may be that you have to pay this in quarterly...as I said, rules may have changed...they are always doing that! LOL The best thing to do is if you take the job, consult an accountant for current regs. If you get a business license, it depends on the state you are in and their rules but you can also file for an IRS Tax ID#. There is so much paperwork to do!!

If you do take the job, the company will send you a Form 1099 at the end of the year rather than a W-2. This is what you will use to file taxes on your income.

Prism99

When I did contract work years ago, I found that adding in my required tax contribution to SS, etc., raised my overall tax rate to almost 50% of gross income. When you are calculating profit from this deal, I would subtract at least 40% for taxes (including income tax) to get a realistic estimate of your net profit. You might be better off taking a job that pays a lot less but is hourly or salaried rather than contract. (If I am remembering correctly, the extra taxes I paid amounted to about 15% of gross income. Add this percentage to whatever your usual income tax percentage is.)

Edit: OK, I did a little Google research and the above is not really accurate. It's true that in my case my net was only about 50% of gross, but that was being our tax bracket at the time was high because of my husband's work.

Basically you can estimate the self-employment tax as 15% of gross income. If you are in an 18% income tax bracket, then you would add 15% to 18% to get an estimated tax liability of 33% on your gross income.

When you are employed by someone else, they pay about half of the 15% into SS/Medicare and you are paying about half. When you are self-employed, you have to pay in both halves.

Ellen

Ok, let me get this straight....you would be doing contract work using your own supplies in your own space and delivering your product to them? Or would you be using their supplies and workspace?
I can't imagine what kind of job would entail getting your own business license.
This is a head scratcher, for sure.

Nanamoms

Under the rules, you can only be a contractor if you use your own tools, supplies, etc. If you use their tools, etc. you are considered an employee of their company. This is something that some employers try to get around but it is stated very clearly in the regs. I was CFO of a manufacturing company where we had piecework done. Before I went to work for them, they treated them as contractors but after informing them of the regs, we changed them to employees of the company since they used all our tools, supplies, etc.

Probably, the reason they are requiring a business license is that it covers them in case of liability, etc. and they can be protected under the tax laws.

Edited to add: The only exception to these rules is for Sales/Commissions type work. That's a whole other set of rules!!

luvTooQuilt

unless its a High $$ paying contract job I cant imagine it would be worth it.. Have you looked into all the fees that are required for filing to set up a company.. ?

Prism99

Also, if you are not yet full retirement age (usually 66), then you do not want to make much over $14,000 during the year; otherwise you will lose $1 in SS benefits for every $2 you earn above that amount.

buslady

Nanamom is correct, they can 1099 you and make you pay both halves of the SS and Medicare. One thing I found out a couple of years ago is that a lot of companies were calling it "contracting" just to get out of those taxes. Regs say that if you are acting like an employee, you are an employee. You know the old saying, "walks like a duck, quacks like a duck, its a duck". This was in the instance of people coming to work on a regular basis, using the companies equipment to perform the job, and going home at the end of the day. There is a lot of contracting going on out there. Just make sure you are fully aware of the details before you get involved. If this is one of those work at home things you see/hear about all the time, PLEASE check them out throughly. There are some unscrupulous people out there. In one instance I know of, a lady bought the supplies from the company, made up the product, and sent it in. They said the workmanship was not up to their standards. She was out not only the income, but the dollars spent for the supplies. Did they care? NO!! They probobly made a profit from the supplies they sold her. Now, I am not saying they are all swindlers, but you need to make sure you know fully what you are getting into. Good Luck. Keep us posted.

Prism99

One thing I don't understand is why you would have to get a business license and set up as a company. An independent contract worker does not need to do that.

nativetexan

I'm thinking of telling them no thanks. I'm not good at doing things that may not be "cricket". I'd work in their office with their computer, etc. It's just a tax filing thing and i think i'd come out on the wrong end of the stick. Social Security is taking enough money from me.
but i do need a job. sigh.