[cmichal]

My husband has been offered a job, but there was some discussion on whether he would be an employee of the company or be a "contractor" and receive a 1099. If he is paid as a contractor and receives a 1099 what are the tax ramifications? Does he have to pay self-employment tax? If this is the case, it seems that it only benefits the company to pay through a 1099. Any advice would be appreciated.

[jakester]

My husband has been offered a job, but there was some discussion on whether he would be an employee of the company or be a "contractor" and receive a 1099. If he is paid as a contractor and receives a 1099 what are the tax ramifications? Does he have to pay self-employment tax? If this is the case, it seems that it only benefits the company to pay through a 1099. Any advice would be appreciated.

cmichal -

The tax ramifications for being a 1099 employee is that your husband would have to pay social security and regular taxes at the end of the year. He would have to pay self-employment taxes, in other words.

To be on the safe side, he can submit estimated income vouchers to the IRS each quarter to provide some cushion as opposed to waiting to file taxes at year end. The tax system is a pay-as-you go system, so if your husband is not paying any taxes during the year, he might be penalized by the IRS if his earnings were substantial.

Basically, companies are dodging the benefits bullet by making employees "self-employed 1099ers" instead of regular "W-2ers", know what I mean?

[MukatA]

For W2 (employee) vs 1099-misc (independent contractor), read
How you will treat the 1099-Misc income, read: Your U.S. Tax Return: W2 vs 1099-Misc: Employee vs Independent Contractor.

[AtlantaTaxExpert]

Jakester pretyy much says it all.

However, there are also IRA and SEP IRA considerations, plus the ability of your husband to claim business expenses to consider.

If your husband can earn a HIGHER base income as a independent contractor to offset the self-employment tax burden, then the independent contractor option may make more sense.

I CANNOT make that determination with the information provided to date, however.