1099 worker

sweatthedetails

sweatthedetails

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So I got my taxes done at one of these local quick tax places and was asking the gentleman preparing them a few questions about my business. I have invested quite a bit of $ into it this year and decided it was time to make it legit. I'm going the sole proprietor route, it's not my main source of income just part time on the weekend. The issue I'm having is that I occasionally have a friend help me out while paying him $10 an hour. I want to claim the payroll as expense, the CPA says for anything under $600 I don't need to do anything but one of my helpers is already pushing $400 for the year. The CPA says to file a 1099 for anyone over, but searching these forums, it does not sound like they would fall in those categories since they are using my supplies and tools. I don't need to go the full rout of workmans comp and all that since this is not a full time employment for them. Is there another option to the 1099? Does have to be full time or this?


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Filing a 1099 for a friend is good for you, but bad for the friend. They will have to cover their own taxes at the end of the year when they are infact probably happy with the 10 an hour they are making. For you to be legit - to 1099 that individual, they must either have their own business to begin with - or you cannot say that they have set hours. You must call that friend daily and say this is the job, this is what I pay, except it or deny it. You cannot tell them that the job is x amount of hours and or tell them that they need to be there or else type situation - very limited control.

If you want to pay 10$ an hour legitimately, you will need to get them to fill out a w-4 and also impound their taxes plus your own (15% +) which will get VERY expensive. Going legite in this business is hard, but doing so either makes you go harder or will make you realize this is not the business for you. IMO of course.
 
B&B Tennessee said:
Filing a 1099 for a friend is good for you, but bad for the friend. They will have to cover their own taxes at the end of the year when they are infact probably happy with the 10 an hour they are making. For you to be legit - to 1099 that individual, they must either have their own business to begin with - or you cannot say that they have set hours. You must call that friend daily and say this is the job, this is what I pay, except it or deny it. You cannot tell them that the job is x amount of hours and or tell them that they need to be there or else type situation - very limited control.

If you want to pay 10$ an hour legitimately, you will need to get them to fill out a w-4 and also impound their taxes plus your own (15% +) which will get VERY expensive. Going legite in this business is hard, but doing so either makes you go harder or will make you realize this is not the business for you. IMO of course.
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:iagree:That right there is some of the best advice you can get...
 
If there is one thing that can get you in BIG trouble with the IRS, pay people as subcontractor who are not. The government does not take employment issues lightly. I would encourage you to tread very carefully and consider consulting another CPA. He should have warned you strongly against any 1099 action because it almost always leads to trouble.
 
VP Mark said:
If there is one thing that can get you in BIG trouble with the IRS, pay people as subcontractor who are not. The government does not take employment issues lightly. I would encourage you to tread very carefully and consider consulting another CPA. He should have warned you strongly against any 1099 action because it almost always leads to trouble.
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As a CPA myself, I agree wholeheartedly with this advice. The individual you consulted isn't wrong, but possibly hasn't taken the time to fully understand your situation / business / needs. Investing a little money now in some solid advice with a local CPA who you can have a good conversation with could save you $$ / headaches in the future.

That sounded like a CPA commercial and wasn't intended to - you've received excellent advice here and my intention was to just reinforce it! :xyxthumbs:
 
rms64 said:
As a CPA myself, I agree wholeheartedly with this advice. The individual you consulted isn't wrong, but possibly hasn't taken the time to fully understand your situation / business / needs. Investing a little money now in some solid advice with a local CPA who you can have a good conversation with could save you $$ / headaches in the future.

That sounded like a CPA commercial and wasn't intended to - you've received excellent advice here and my intention was to just reinforce it! :xyxthumbs:
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BOOM.

I'll be Captain Obvious here, but what the heck....

First, congratulations to you on the business, and here's hoping your investment reaps great returns.

Second, your next key business investment/expense should be to seek counsel from a tax expert. Whether this is your CPA or someone else...your call....although I do advise running, not walking, away from the discount tax preparer. You need real advice - current, accurate, and detailed information that will guide you throughout the year. As your business grows, the distinction between part-time employee and subcontractor will be but one of your worries. Local, county, state, fedaral....every level of government comes into play here, both in terms of taxation and licensing and other regulatory issues that vary from one locale to another.

The silver lining is that every dollar you spend in this direction is tax deductible. FWIW, I went this route back in 1993, and haven't once regretted it. It's not only saved me time and grief, but I'm absolutely convinced it's made/saved me money. A real tax pro will know exactly what to claim, and when, to minimize your tax obligations....while protecting you from the risk of being audited (or at least to help ensure you survive an audit if it happens).

Just my two cents....good luck!
 
VP Mark said:
If there is one thing that can get you in BIG trouble with the IRS, pay people as subcontractor who are not. The government does not take employment issues lightly. I would encourage you to tread very carefully and consider consulting another CPA. He should have warned you strongly against any 1099 action because it almost always leads to trouble.
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This gentlemen is correct. I am a retired CPA. You NEED to get a legit CPA, who works with smail business to explain the rules and set you up correctly. I warn you the the government take this stuff very seriously ( no matter what you friends may tell you),

Get it right, or else do not do it all.
 
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