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-   -   My employer is not withholding taxes (https://www.askmehelpdesk.com/showthread.php?t=305896)

  • Jan 19, 2009, 03:05 PM
    BigMarkFan
    My employer is not withholding taxes
    I recently started a new job. My boss is paying me $12 an hour and said he'll give me a 1099 at the end of the year. I understand that I need to pay quarterly estimated taxes and will do that, but I'm concerned about FICA and Social Security and anything else that would be deducted if I were on a real payroll.
    What do I need to have deducted? I'm lost here. I am considered an employee, not a private contractor.
    Any help you can give me will be greatly appreciated - thanks in advance!
    :confused:
    Nancy
  • Jan 19, 2009, 03:22 PM
    JudyKayTee
    Quote:

    Originally Posted by BigMarkFan View Post
    I recently started a new job. My boss is paying me $12 an hour and said he'll give me a 1099 at the end of the year. I understand that I need to pay quarterly estimated taxes and will do that, but I'm concerned about FICA and Social Security and anything else that would be deducted if I were on a real payroll.
    What do I need to have deducted? I'm lost here. I am considered an employee, not a private contractor.
    Any help you can give me will be greatly appreciated - thanks in advance!
    :confused:
    Nancy



    To the best of my knowledge if you're an employee the employer pays the FICA, unemployment, WC, etc. and you get a W-2.

    I don't understand how/why you're an employee. The "rules" for being a 1099 (independent contractor) are very stringent. You and your employer can't just unilaterally decide it's a good idea so I'm confused here.
  • Jan 19, 2009, 07:04 PM
    MukatA

    You are being employed as independent contractor. You will get 1099-misc and must take care of your own taxes. Read: Your U.S. Tax Return: W2 vs 1099-Misc: Employee vs Independent Contractor.
  • Jan 19, 2009, 07:25 PM
    Fr_Chuck

    No you are not hired as a employee, you are a independent contractor.

    And you need to be putting back 30 to 40 percent of your pay for taxes depending on your deductions.
    You are going to pay 7.5 percent more taxes, since as a employee the company pays matching money on the social security.
    Also you will not be covered under unemployment, so if they fire you, there will be no money to collect
  • Jan 20, 2009, 03:25 AM
    de_de_gc

    BigMarketFan,

    Everyone is making good points here. The issue is are you or are you not an independent contractor.

    IF you are not an employee, then you are an independent contraction and effectively your own employer. As such, you are responsible for paying not only the employEE portion of your taxes, but also the employER portion of taxes. At minimum, you will need to put 15.3% of the gross amount you are being paid to cover your self-employment taxes. Over and above that, you should estimate your federal and state income tax rates for 2009, in order to put aside your income taxes that will be due (Gross wages x 92.35% x income tax rate). People who are responsible for making estimated taxes payments pay 25% of estimated annual taxes on the 15th of April, June, September, and January. (Yes, the January date is in the following year.)

    IF you are NOT an independent contractor, your employer does not get to get around his/her obligation to properly withhold and pay the appropriate taxes. May I suggest that you diplomatically seek to clarify the matter with your “employer”? See if the information in Publication 15-A is helpful to you: http://www.irs.gov/pub/irs-pdf/p15a.pdf

    Please let us all know if this is not clear.
  • Jan 12, 2010, 11:21 AM
    rocksmart
    I am currently working for a new company as a commission salesperson. We all have just been told that they will not be taking taxes out of our paychecks. We most definitely are not independent contractors as defined by the IRS. The company provides an office, pays for leads, tells us what time to be there and when we can leave, we cannot hire our own employees. They also do not pay any minimum hourly wage, just strictly commission. There is nothing that we can legally deduct as business expenses as the company pays for everything including sales materials, even down to our ink pens.
    I believe they just don't want to pay Social Security or workmens comp. My main question would be what recourse do we have? If I file the form SS-8 and it is proven that we are employees, does the company have to cough up the taxes or are we still liable for all of the taxes?
  • Jan 13, 2010, 11:19 AM
    AtlantaTaxExpert
    To all who have posted, you have made good points, but have ignored the basic issue: are these people REALLY independent contractors or are they employees who are being shafted by their employer?

    The answer is the latter, pure and simple. The employer has to pay 7.65% of the employee's salary in FICA (Social Security and Medicare) taxes PLUS unemployment taxes (about 1-2%) plus workmen's compensation plus, in some states, mandated health coverage. Additionally, to remain competitive in hiring, some type of pension plan is also added. Add to that the cost of administering these additional costs with a payroll department or outsourced to a separate company, and you have a decent picture of the issue.

    These costs add as much as 100% to the costs of employing someone as a W-2 employee, something avoided by simply designating a person as an independent contractor, while retaining the controls that exist to make sure the "contractor" does what an employee does.

    This obviously illegal process CAN be challenged, either by contacting the IRS and requesting a audit of the employer's accounts or submitting paperwork with their annual return that alerts the IRS that this abuse is happening.

    The only problem with that procedure is that it is a guaranteed, full-proof way to get FIRED! You are, after all, identifying an illegal activity to the IRS, and no employer wants to draw ANY attention from the IRS. If the employer DOES draw that attention, you can be sure he/she WILL find out who turned him in.

    Given the current economic reality of double-digit unemployment and having anywhere from 5 to 15 unemployed persons waiting to fill your vacated position, I doubt that you have much choice but to put up with it until you find a better job with some other employer.
  • Jan 13, 2010, 04:27 PM
    rocksmart
    Thank you very much for answering my question. I do realize that turning them in would get all of us fired, there are approximately 20 employees and all of us are concerned about this. When we were hired we were told that taxes would be taken out, and we all filled out our W-2's. Then about five weeks into the job, we have been told that they will not take taxes out and we had to fill out the forms for 1099's.
    Yes, you are correct, they are plenty of other people willing to take our jobs. So, in essence, we all have to put up with this. Pretty sad. What makes it even worse is that none of us have absolutely anything that can be written off as business expenses to help reduce our tax liability as the company pays for everything.
  • Jan 14, 2010, 01:43 PM
    Five Rings

    Well, you have not really described what it is you do.
    You are either a non statutory employee in which case these rules apply:
    Statutory Nonemployees

    Or you are a statutory employee in which case these rules apply:
    Statutory Employees
  • Jan 14, 2010, 01:56 PM
    Five Rings
    For far greater detail and examples see:
    http://www.irs.gov/pub/irs-pdf/p15a.pdf

    Chapter 2.

    I wouldn't worry too much about being fired. Your employer will have plenty to occupy his time if it turns out he has been avoiding paying the Employment taxes the IRS believes he owes.
  • Jan 14, 2010, 08:31 PM
    rocksmart
    The business that we are in is a sales organization (Company B) for a members only travel club. The company (B) markets and gets customers to come in and we (the salespeople) sell the membership to them. The clients then become members with the travel club ( Company A) who they have a contract with. All we do is get new members for Company A.
    The salespeople are trained, given sales materials, and totally directed as to how to complete a sale.We are hired as permanent employees, but as in all sales organizations, if you don't meet your sales quota you probably won't have a job very long. All of this is done in a permanent retail establishment that company B provides. We are paid a percentage of the sale. We do not have a contract of any kind nor do we have any investment in equipment or property used. They do have behavioral and financial control. They have said that they plan on getting health insurance for us also.

    If we don't make a sale we don't get paid. If we don't have enough clients coming in and don't have a chance to make a sale, then we do not get paid. This happens a lot.
    We understand that we work on straight commission only, this is typical for this type of business, although I'm not sure that this is even proper.
    However the main concern is how to keep our jobs but not let them get away with this. This scenario is not uncommon in this area. This is a tourist area with many timeshare companies and travel clubs. The timeshare companies have all had class action suits against them and have had to pony up a ton of money for not paying a minimum wage or not paying overtime.
    A lot of the travel clubs have cheated many people out of sales commissions and most of them pay cash only, but they don't stay in business long. The company I currently work for is trying hard to build a good business and plan on being around for a very long time. However we as salespeople are tired of being cheated by these companies and by them not taking taxes out it seems we are getting cheated once again.
  • Jan 16, 2010, 08:06 AM
    Five Rings

    Your getting screwed.

    Topic 762 - Independent Contractor vs. Employee

    To determine whether a worker is an independent contractor or an employee under common law, you must examine the relationship between the worker and the business. All evidence of control and independence in this relationship should be considered. The facts that provide this evidence fall into three categories – Behavioral Control, Financial Control, and the Type of Relationship itself.

    Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training, or other means.

    Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker's job. This includes:

    The extent to which the worker has unreimbursed business expenses,
    The extent of the worker's investment in the facilities used in performing services,
    The extent to which the worker makes his or her services available to the relevant market,
    How the business pays the worker, and
    The extent to which the worker can realize a profit or incur a loss.

    Type of Relationship covers facts that show how the parties perceive their relationship. This includes:

    Written contracts describing the relationship the parties intended to create,
    The extent to which the worker is available to perform services for other, similar businesses,
    Whether the business provides the worker with employee–type benefits, such as insurance, a pension plan, vacation pay, or sick pay,
    The permanency of the relationship, and
    The extent to which services performed by the worker are a key aspect of the regular business of the company.


    File Form SS-8
    http://www.irs.gov/pub/irs-pdf/fss8.pdf , Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.
  • Jan 16, 2010, 09:50 AM
    JudyKayTee
    Quote:

    Originally Posted by Five Rings View Post
    For far greater detail and examples see:
    http://www.irs.gov/pub/irs-pdf/p15a.pdf

    Chapter 2.

    I wouldn't worry too much about being fired. Your employer will have plenty to occupy his time if it turns out he has been avoiding paying the Employment taxes the IRS believes he owes.



    I don't see the relationship between the employer having plenty to do and firing - I think the warning that the "employees" could be fired is a good one in these difficult economic times.
  • Jan 16, 2010, 11:01 AM
    Five Rings

    Then perhaps you should look more carefully Judy.
  • Jan 16, 2010, 08:35 PM
    JudyKayTee
    Quote:

    Originally Posted by Five Rings View Post
    Then perhaps you should look more carefully Judy.


    After reading your other posts and your need to make speeches this response does not surprise me. I find that people who cannot explain themselves either post long quotes or get defensive.
  • Jan 17, 2010, 12:04 AM
    Five Rings

    You may wish to consider contacting the IRS on this matter.

    You may remain anonymous if you wish; see
    How Do You Report Suspected Tax Fraud Activity?
  • Jan 24, 2010, 10:32 PM
    Shellymay85
    As to the firing issue- isn't there federal labor laws forbidding an employer from firing an employee for reporting an illegal act? I know there is in California. And unless they come up with a viable reason for firing you- you can always collect unemployment until you find another job. And if they do fire you- you can report it to labor board and if I understand correctly labor board will make the employer pay you the money you would have been paid for all the days you weren't working because they fired you.

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