Many Coeur d’Alene employers are hiring 1099 workers (independent contractors), instead of the traditional W-2 employee. There are many reasons for this, but the biggest benefit is through the lower administration and tax cost. This directly shifts the burden of paying Coeur d’Alene employment taxes, cost of tools or supplies, and travel expenses on the back of the Coeur d’Alene independent contractor.
Which Taxes Must Be Paid?
A Coeur d’Alene o independent contractor will pay all required state and federal income taxes, along with Coeur d’Alene’s self-employment taxes.
How Often Do I Pay Taxes?
Usually, the Coeur d’Alene independent is required to make quarterly estimated payments based on the previous year’s income. This payment goes to the IRS and allows you to avoid being hit with penalties and a high tax liability at the end of each year.
Reducing Taxes Owed.
To offset tax expenses, you must take advantage of Coeur d’Alene tax deductions, credits, and all general Coeur d’Alene business expenses. You will need to treat your 1099 working status as a full-fledge Coeur d’Alene business.
Coeur d’Alene Businesses Getting Busted For 1099 Workers
Has your Coeur d’Alene S corporation been paying you a compensation on Form 1099-MISC?
By having your Coeur d’Alene S corporation pay you on just a 1099, you have the following three issues:
- Your Coeur d’Alene S corporation violates tax law because it fails to pay you W-2 wages for the services you performed for the corporation.
- The IRS can reassign your Coeur d’Alene S corporation’s 1099 payments as wages and hand the S corporation a hefty tax bill consisting of back payroll taxes, interest, and penalties.
- You are likely to have deductible expenses with the wrong entity. Tax law requires that the expense deduction belongs to the entity that incurred the expenses and earned the related income.
If you pay yourself on both a 1099 and a W-2, you also have tax issues:
- You likely pay several thousand dollars more in Coeur d’Alene self-employment tax than required.
- You muddy the water when it comes to Coeur d’Alene business deductions. It may be very unclear whether you should deduct the expenses on Schedule C or on the Coeur d’Alene S corporation return. This confusion can cause you to claim the expenses on the wrong tax returns and can enable the IRS to deny your valuable Coeur d’Alene business deductions.