AboutCarlton Johnson, LPA, MFP, ABA Expertise Accounting for Small and Mid-sized Businesses
Bookkeeping - Setup and Maintenance
General Business Taxation
General Risk Management
Financial and Business Line Modeling
General Payroll
Employee vs. Independent Contractor Questions
Experience Concurrent Experience Includes:
9 Years in General Accounting
7 Years in Business Planning and Setup
6 Years in Financial Analysis and Modeling
Organizations Fellow of the Financial Academy of Financial Management
Education/Credentials Bachelor of Arts, Accounting, Morehouse College.
Licensed Public Accountant (PA), State of Delaware.
Master Financial Professional (MFP), American Academy of Financial Management
Accredited Business Accountant (ABA), Accreditation Council for Accountancy and Taxation
Question I earned $6600 working in the hotel and received 1099-Misc (non-employee compensation, box 7). I am being claimed as a dependent on my parents tax forms.
This was my only income for the 2007.
I did my tax calculations on 1040: business income (line 12) $6,600; self employment tax (line 27) $467; AGI $6133 (line 38), standard deduction $5350, taxable income $783 (line 43), tax $79; self-employment tax $933 (line 58), total tax to pay to IRS: $1012. Is that right?
If I claim that I was an employee and fill out the SS-8 form, then I can only pay uncollected social security and medicare ($505)and a tax on $1250 ($6600-5350=$1250), which is $126. So, my total payment would be $505 $126=$631.
This is a big difference: $1012 versus $631. What should I do? Which scenario can I use?
Thanks!
Answer Hi Ana,
You must follow the form in which you were paid to answer the tax question. For the year, you mention receiving a 1099-Misc (for independent contractors). If there were no arrangements to withhold taxes (as there is usually in an employment arrangement), you will be liable for Federal, State, and full FICA (Social Security and Medicare) taxes.
As an independent contractor, see assistance from a tax preparer who can help you determine the relevant expenses that match the revenue you received. Some of these may be itemized expenses overlooked in the first preparation.
