[Asunnytoll26]

My husband is call a subcontractor from his job, but he has to wear a uniform and drive a company car, company phone. He has to do everything they want like an Employer. He gets a 1099. We filed our taxes and we made just enough to get everything back but since he is a ((Subcontractor)) he had to pay over $3000. to the IRS. He only made 21,000 this tax year and we have 4 kids. Did we do something wrong how can we avoid this next time.

[codyman144]

He probably has to pay more taxes because he is self-employed and therefore needs to pay both the employee and employer portion of SS and Medicare tax.

I probably know enough to answer your question but I am no tax expert so I am going to ask this be moved to the tax section where an expert will see it.

[Fr_Chuck]

Moved to taxes,

He may seem like a employee but he is being paid as a self employed person.
He needs to see about changing that to be an employee

There is no taxes withheld from his check, so he should be filing every quarter his estimated taxes.

In addition to all of the regular taxes, since he is self employeed ( treated as such in pay anyway) the company does not pay its matching social security funds, so he has to pay the full amount of 15 percent, not just 1/2.

So our of each check he needs to save money out for taxes, just like if the company was holding it back.

[MukatA]

In comparison to W2 income, the receiver of 1099-misc pays about 7.6% more in SE taxes. However, the advantage is that the receiver can deduct expenses on schedule C (Form 1040) without the need to itemize it as in case of a W2 employee.

[AtlantaTaxExpert]

Asunnytoll:

There IS a form to file with the return to essentially claim that he is an employee even if he is being paid as a subcontactor. This will allow him to avoid paying the self-employment taxes.

However, in doing this, your husband is essentially "throwing the gauntlet down" before his employer, because the IRS WILL come back to the employer and investigate their work structure to determine if they are "abusing" their employees by treating them as independent contractors.

Based on what you have posted, that is EXACTLY what they are doing, and if the IRS agrees with my assessment once they do their own investigation, the IRS will impose some rather LARGE fines on your husband's employer.

Once that happens, the employer will, of course, try to find out who told the IRS about the situation that caused them to get that fine. Once they find out (and they WILL find out), I suspect your husband's future with the company will not be too bright.

In today's economy, do you want to take that chance?