- quote -

Self-employed and independent contractor are essentially the
same thing. You are both. For a detailed discussion of this,
see the recent thread in this newsgroup titled "IRS document
on Self-Employed vs. Independent Contractor."

- quote -

You should be making quarterly estimated tax payments, not
just holding the money for taxes in your own account. And
you should be paying more than what used to be taken out,
because you have to cover the self-employment tax.

- quote -

Yes.

- quote -

It will work out better for him, because he no longer has to
pay the employer's share of social security and Medicare
taxes, and probably avoids other employment taxes as well.
But you now have to pay the employer's share.
Self-employment tax is a combination of the employee's and
employer's shares. Apparently your boss did not increase
your percentage to compensate for the additional tax you
have to pay, so he has shifted part of the tax burden from
himself to you. On the other hand, since you are now in
business for yourself, you may have expenses that you could
not deduct as an employee but can now deduct as business
expenses.

Bob Sandler

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Shhhh" <123[at]456.com> wrote:

- quote -

One land mine is that you will be responsible for paying the
7.5% employer's share of social security tax. Formerly you
paid 7.5% and the employer paid 7.5%. Now you will have to
pay the entire 15%.

This definitely works out better for you former employer.

Some advantages to you are that you will more easily be able
to deduct business expenses, but you will have to keep
meticulous records of those expenses. As a Schedule-C (sole
proprietor) you will probably have higher bookkeeping and
tax preparation fees.

--
To email me directly, remove CLUTTER.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"Shhhh" <123[at]456.com> wrote:

- quote -

If your job description did not change, your (legal)
designation probably should not have changed. Take a look
at this IRS webpage to determine if you should be classified
as an employee or an independent contractor:
http://www.irs.gov/businesses/small/...=99921,00.html

- quote -

Doesn't matter. For all practical purposes they are the
same. The only difference I can think of is that sometimes
you're required to get a business license, sometimes you can
do without it.

- quote -

Assuming your employer is doing this properly, you should
figure out what should be saved, and estimated taxes paid
probably quarterly. You should consult with a CPA or EA who
will be able to analyze your specific situation and tell you
the best way to deal with this.

One difference is that you will be able to take the
deduction for having an office in your home, if it qualifies
(regularly and exclusively used for business), as well as a
portion of your utilities and other expenses your employer
may not have paid for.

- quote -

Good advice.

Stu

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Hello all,

A little background:

I work from home and I am a futures trader. I trade for a
group in chicago, and my salary is a percentage of the
profits I produce. When I first started in 2005 I recieved
my "paychecks" for lack of a better terms via direct deposit
with taxes already taken out. At the end of the year (i.e.
for april 2006 (taxes payable for 2005)) I recieved a W2
with the amount shown being the amount of money I recieved
and the amount of taxes I paid.

Sounds simple enough right?...well this year (2006) started
out the same way. I recieve my pay direct deposit with
taxes taken out. Then october rolls around and all of a
sudden our "boss" informs us we are no longer W2'd
employees. Since my checks have come via snail mail. and no
taxes have been taken out. (I immediately take out the same
percentage of my check for tax purposes as was taken out
before and save it in a separtate money market accout.) My
boss said he will send us W2s and 1099s this year. but next
year we will be on 1099s for good.

So my question is am I considered self-employed or an
independent contractor? With either of these designations,
are there any land mines I should look out for? Will I be
responsible fo self-employment tax from here on out? Our
boss says this will work out better for all of us. Is that
true? What does this mean for me?

Please offer all help and insight...
Thank you for your time,
Shhhh

Moderator:
Welcome to the land of 1099 and 179 items. It seems like
a good time to negotiate a raise to cover their share of
employment taxes!

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >