1099's vs. Actual Employment...

[e.rose]

This is gonna be a weird question, but bare with me...

So...

Does anyone have any insight to the disadvantages to having someone work for you as a sub-contractor and paying them as such and having a 1099 for them during the tax year, rather than bringing them on as an actual employee?

I'm not asking because I have someone like that I'm working with... I'm asking because I *am* the one like that... haha.

I was just thinking about this today... and in the capacity that I'm working with my friend on his business... he's definitely going to have to do a 1099 for me. After $600 in TN is when that is required to be reported, and he's definitely going to end up paying me more than that by the end of the year.

And quite frankly, I'm okay with not being an official employee, because as far as I'm aware, for me to be an actual *employee* he needs to provide insurance and workers comp and all that crap and 1. I have insurance through my day job and 2. I don't want him to have to worry about *any* of that. At least not right in the beginning, during the first year or two of us working together.

So is there anything that I'm unaware of with working as a 1099 contractor for him, that... could potentially be a downside or bite us in the a**?

I can't imagine what that would be, but I want to make sure we're not accidentally getting ourselves in trouble eventually by doing it this way.

 

[Vtec44]

Health insurance and other benefits as a full time employee, and accounting advantages for big corporations since technically you're not on the payroll. Other than that, I don't know of any "hidden" benefits.

 

[e.rose]

Health insurance and other benefits as a full time employee, and accounting advantages for big corporations since technically you're not on the payroll. Other than that, I don't know of any "hidden" benefits.

I'm confused, are you saying that I'd be missing out on health insurance and benefits, but that if it were a big corporation they'd be gaining accounting advantages?

^^^^If that's the case, I'm cool with that.

As long as he's cool with the paperwork involved during tax filing season (and he will be if it'll cost him less, haha), then I'm good with being a 1099 contractor.

 

[snowbear]

I come from the local government (county) environment and for them, it comes down to benefits. Contractors get no benefits such as health insurance, leave, overtime, or worker's compensation from the County.

 

[Gary A.]

Be aware that employment laws differ from state to state. A 1099 is a form sent to the tax authorities informing them of how much you've made so the authorities can keep an eye open for your tax payment(s). You may have to make quarterly reports/payments. In Californian, a 1099 means that you may not be eligible for employment benefits ... ala ... health insurance, sick days, breaks, overtime, worker's comp, et al. In California, a 1099 means that you choose your own hours, use your own equipment, you can incorporate/DBA and subtract your expenses from your revenues and pay taxes only on the profit.

 

[e.rose]

Be aware that employment laws differ from state to state. A 1099 is a form sent to the tax authorities informing them of how much you've made so the authorities can keep an eye open for your tax payment(s). You may have to make quarterly reports/payments. In Californian, a 1099 means that you may not be eligible for employment benefits ... ala ... health insurance, sick days, breaks, overtime, worker's comp, et al. In California, a 1099 means that you choose your own hours, use your own equipment, you can incorporate/DBA and subtract your expenses from your revenues and pay taxes only on the profit.

Oh, I know how it works for *me*. I've had to file 1099's before.

I just want to know what it looks like for *him*.

I've had to issue a 1099 for one of my hair/makeup artists this year, but she made exactly $600 and then moved to LA, so I don't have to worry about her anymore.

But I'm working for Matthew under a very consistent employment at this point, so I just wanted to make sure there wasn't like... a certain point of income where you *had* to hire someone on as an employee rather than as a 1099 contractor.

 

[Gary A.]

Be aware that employment laws differ from state to state. A 1099 is a form sent to the tax authorities informing them of how much you've made so the authorities can keep an eye open for your tax payment(s). You may have to make quarterly reports/payments. In Californian, a 1099 means that you may not be eligible for employment benefits ... ala ... health insurance, sick days, breaks, overtime, worker's comp, et al. In California, a 1099 means that you choose your own hours, use your own equipment, you can incorporate/DBA and subtract your expenses from your revenues and pay taxes only on the profit.

Oh, I know how it works for *me*. I've had to file 1099's before.

I just want to know what it looks like for *him*.

I've had to issue a 1099 for one of my hair/makeup artists this year, but she made exactly $600 and then moved to LA, so I don't have to worry about her anymore.

But I'm working for Matthew under a very consistent employment at this point, so I just wanted to make sure there wasn't like... a certain point of income where you *had* to hire someone on as an employee rather than as a 1099 contractor.

State Law dictates if you are an employee or an independent contractor ... not a 1099. (In California, employers are stung everyday by 1099 folks, who, per state law, are actually employees and sue the employer or former employer for unpaid benefits. I don't think you fall into that category of suing your employer ... so there is probably little liability on his end. While I am an employer, I am not an expert on these matters.)

 

[e.rose]

Be aware that employment laws differ from state to state. A 1099 is a form sent to the tax authorities informing them of how much you've made so the authorities can keep an eye open for your tax payment(s). You may have to make quarterly reports/payments. In Californian, a 1099 means that you may not be eligible for employment benefits ... ala ... health insurance, sick days, breaks, overtime, worker's comp, et al. In California, a 1099 means that you choose your own hours, use your own equipment, you can incorporate/DBA and subtract your expenses from your revenues and pay taxes only on the profit.

Oh, I know how it works for *me*. I've had to file 1099's before.

I just want to know what it looks like for *him*.

I've had to issue a 1099 for one of my hair/makeup artists this year, but she made exactly $600 and then moved to LA, so I don't have to worry about her anymore.

But I'm working for Matthew under a very consistent employment at this point, so I just wanted to make sure there wasn't like... a certain point of income where you *had* to hire someone on as an employee rather than as a 1099 contractor.

State Law dictates if you are an employee or an independent contractor ... not a 1099. (In California, employers are stung everyday by 1099 folks, who, per state law, are actually employees and sue the employer or former employer for unpaid benefits. I don't think you fall into that category of suing your employer ... so there is probably little liability on his end. While I am an employer, I am not an expert on these matters.)

Yeah, definitely not planning on suing him, haha. This is a very mutually beneficial arrangement to keep it this way, for now.

What department do I need to go to in order to get the correct information for this in TN?

Is that the... I dunno, department of revenue's area? Do you know?

 

[Vtec44]

I'm confused, are you saying that I'd be missing out on health insurance and benefits, but that if it were a big corporation they'd be gaining accounting advantages?

Yes. In addition to not having to pay for the benefits, big corporation also use this as a way to reduce head count, hence, looking good on their accounting.

 

[e.rose]

I'm confused, are you saying that I'd be missing out on health insurance and benefits, but that if it were a big corporation they'd be gaining accounting advantages?

Yes. In addition to not having to pay for the benefits, big corporation also use this as a way to reduce head count, hence, looking good on their accounting.

Cool. Well as long as Big Brother isn't gonna come after him for not having me on as an actual employee, I'm good.

 

[TreeofLifeStairs]

Be aware that employment laws differ from state to state. A 1099 is a form sent to the tax authorities informing them of how much you've made so the authorities can keep an eye open for your tax payment(s). You may have to make quarterly reports/payments. In Californian, a 1099 means that you may not be eligible for employment benefits ... ala ... health insurance, sick days, breaks, overtime, worker's comp, et al. In California, a 1099 means that you choose your own hours, use your own equipment, you can incorporate/DBA and subtract your expenses from your revenues and pay taxes only on the profit.

Oh, I know how it works for *me*. I've had to file 1099's before.

I just want to know what it looks like for *him*.

I've had to issue a 1099 for one of my hair/makeup artists this year, but she made exactly $600 and then moved to LA, so I don't have to worry about her anymore.

But I'm working for Matthew under a very consistent employment at this point, so I just wanted to make sure there wasn't like... a certain point of income where you *had* to hire someone on as an employee rather than as a 1099 contractor.

State Law dictates if you are an employee or an independent contractor ... not a 1099. (In California, employers are stung everyday by 1099 folks, who, per state law, are actually employees and sue the employer or former employer for unpaid benefits. I don't think you fall into that category of suing your employer ... so there is probably little liability on his end. While I am an employer, I am not an expert on these matters.)

It's not really the state that determines it. They just go along with what the fedral government says. Here's a link to the IRS web site about 1099 vs w-2. Independent Contractor Self-Employed or Employee. Wrongly classifying what you are can be bad if you/he is audited. It comes down to who is paying the taxes. As 1099 you pay all taxes. As w-2 you share the taxes.

 

[e.rose]

Independent Contractor Defined

This is so vague.

Like... I don't have set full time hours. Or part time hours. Or set hours at all. I just do things as needed.

Like at 1am last night when I had an idea and started doing some quick research while I was in my PJs in bed. Hahaha.

I don't have a uniform or a dress code... He doesn't control HOW I deal with his paper work or emails, but I have an email address [email protected] -- So like... This doesn't make any sense. Haha. He doesn't pay me a salary... I don't make hourly wage... I make a percentage off of the shoots he books.

I pay my taxes on my 1099's. It's not like I'm planning on NOT doing that.

 

[Braineack]

Cool. Well as long as Big Brother isn't gonna come after him for not having me on as an actual employee, I'm good.

Matthew, I'm a friend, right? So you'll let Emily work here?

 

[pgriz]

I'm not in the USA, so this may be completely irrelevant for you, but in my jurisdiction, the reason why the tax authorities care about whether someone is a contract worker or employee is because if you're an employee, then there are workman comp payments due by both the worker and the employer. It also links to the filing frequency of both income tax (installment payments) and sales tax, and whether you will be allowed to deduct expenses or not. So, if you're an employee, they then shake down the business, whereas if you're a sub, they have to keep tabs on you.

 

[KmH]

An employer in the US pays 1/2 of an employee's FICA payments.
States also require an employer pay unemployment insurance and workman compensation insurance payments.

All of that is why employees usually get paid considerably less than contractors get paid.