[fibian]

Location: Ventura County in California.

Been interning for a couple of months designing home décor and assisting the Merchandising Department. I get paid $1000 monthly and zero taxes are being withheld from my paychecks. This is the first year my parents won't be able to claim me as a dependent. I signed a contract with the company for a "month to month" basis internship (didn't say anything about a contractor). I was wondering what taxes I'm liable for? Any deductions? Should I be saving anything? Thank you in advance!

[AtlantaTaxExpert]

You are definitely an independent contractor and will need to file Schedules C and SE.

You will be liable for federal and California income taxes plus the 15.3% self-employment

[N0help4u]

A thousand a month you should get most all taxes you pay back. Use the ez form and file for earned income credit. Do not go to H&R block for your taxes. They told me I wasn't eligible for any return in 2011. I went and had it redone somewhere else and got back 809.

[AtlantaTaxExpert]

Exactly how much you will owe depends on how long you keep working. You need to put aside about 25% of each check.

[AtlantaTaxExpert]

NoHelp4U is referring to the Earned Income Credit when stating you will get money back.

The EIC may or may not apply in your case. It depends on your age and whether you are considered to be a student.

[N0help4u]

I was thinking according to a thousand a month would come to below 12, a year which is below the tax paying level. I am up to $15, and I still get a return. But yes its good to save 25% in case.

I receive EIC and my only qualifications are single and under the tax paying income level and filing the 1040. They say that it pretty much only depends on if you are single OR have kids.

[joypulv]

From the Dept of Labor:
"Internships in the “for-profit” private sector will most often be viewed as employment, unless the test described below relating to trainees is met. Interns in the “for-profit” private sector who qualify as employees rather than trainees typically must be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek."
ALSO
"The internship should be of a fixed duration, established prior to the outset of the internship. "

In other words, your job may not really qualify as an internship, and you certainly aren't a contractor, working on their premises without the benefits of WC and other insurance. So you should be getting minimum wage with deductions! Employers would pay half of SS, but this way, you have to pay it all. It's just a way for companies to save money and dodge a lot of taxes. If you got hurt on the job, they'd be in a lot of trouble. They can get in trouble even if you don't.

[AtlantaTaxExpert]

$12k may be below payment level for California, but after a $6,000 standard deduction and $3,900 personal exemption, taxes start at 10% at the federal income tax.

The 15.3% self-employment tax starts at $400.

[AtlantaTaxExpert]

What joypulv says is correct. If you appealed to the IRS that you in fact were an employee, you would probably win.

You would also burn any bridges you had with the firm and possibly be blacklisted in the industry.

Something to consider.

[joypulv]

What joypulv says is correct. If you appealed to the IRS that you in fact were an employee, you would probably win.

You would also burn any bridges you had with the firm and possibly be blacklisted in the industry.

Something to consider.

Absolutely. I would do one of two things, soon:
Find a real job with at least minimum wage and withholding elsewhere.
OR
With careful forethought, suggest that it's time they made you an employee, because you really love the job and just as an aside, would hate for them to get in trouble. Be prepared for that not working though.

[fibian]

Thanks for everyone that replied! I'm no longer a student, as I've since graduated, and loan payments will be coming up soon. I'll probably have to ask for a deferment and just pay interest. AtlantaTaxExpert, would I qualify for the credit since I've already graduated?

I'm looking for a real job immediately, but haven't had the best of luck. Lots of companies are just looking for interns. I doubt they'd make me a regular employee, A LOT of the people here are on a contract. The only people who are paid hourly are the call center people. Either way, I'm not looking to stay.

Also I work 25 hours a week. I'm not allowed to work anything over that. If I had an official hourly rate, it'd come out to $10/hr if it matters.

I started saving already, since I figured I was going to get screwed with taxes. Are there any deductions I can claim? Hopefully I can get something back from that.

Also IF I do end up wanting to appeal to the IRS how would I go about that? Chances of winning? I feel like I'm completely in the right here. I definitely don't plan on being here come tax season or staying in home décor. I only took this internship cause the $1K looked too good to pass up.

Thank you again!

[fibian]

Sorry guys, I meant if there were any expenses I could claim?

[AtlantaTaxExpert]

You have to be over 24 years of age to qualify for the WEarned Income Credit unless you have children.

There are SOME deductions you can claim on Schedule C, like cell phone and computer use, and mileage while at work (to and from is commuting and does NOT count).

[joypulv]

NoHelp, your comment about getting taxes back doesn't apply - no taxes were withheld, and taxes are owed no matter how low the income. And the 1040EZ cannot be used.

The EIC can be calculated to see if you qualify at the end of the year, and being a student has nothing to do with it.

There's no 'appeal' to the IRS. You can turn the employer in to the IRS and to the Dept of Labor, but not for your benefit.

Expenses are whatever you spent on items directly related to the job - materials, supplies, transportation. Look at Sch C on IRS.gov.