Hi. I recently started working part time for a local farm. Picking strawberries right now, but possibly other things once berry season winds down. I don't really NEED the job, just doing it to make some extra spending money. So I asked them how pay worked. They told me they fill out a 1099 for each employee, and turn them into their accountant... who then gives them a form (they forget which form) to give to each employee at the end of the year. So... they take no taxes out of my check, but do send the info to the IRS which would make me responsible for paying the taxes at tax time. The odd part (to me) is she said that the taxes usually only amount to about 5% of the employees pay... which can't be right!? Can it? I've never worked a job like this, and so I don't know how to figure out how much I'll owe come tax time. It's not worth it if I'm going to owe a bunch then. Picking strawberries, my wage figures out to about $15/hr.

Thanks for any help.

Angela

I'm no accountant but generally a 1099 is used for one self employed person or company to hire another self employed person or company to perform work , and each is responsible for not only their own taxes but liability insurance , workers compensation , UI and so on


That's in a legitimate scenario


But some abuse it and call what would normally be an employee an independent contractor. Avoiding alot of costs to themselves .

If that's the case you need to make more per hour to cover those costs yourself

1099 income is basically contract income instead of W-2 income. This way the employer does not need to withhold Social security income tax or federal and or state if they don't want to. The 5% may well reference what you pay in total on your total reported income and not just what would be withheld in W-2s. most families that have household incomes in the middle income brackets have low total tax based on their AGI.
You can record the 1099 income in other income and technically you are liable for the full social security tax and thus many report 1099 income on schedule C' or Fs depending upon what you choose to have. Being a contract employee does entitle you to claim mileage to and from where you work and other expenses as well. Filling out a schedule C is not complicated. Yes the 1099s are reported to the IRS or the state. If you utilize a tax preparer he/she can direct you better as how to record the income.

Bryce

it is a way for the employer to not have the responsibility on them. Too bad they just don't pay you in cash with no strings attached.

Not an accountant but do my own taxes and my wife works as a private contractor for a big ag chemical company. They pay her contract work with a 1099. We just figure between 15-20% of the pay will be gone with taxes. That said - you can now operate as a contractor for hire. You are paid with 1099 wages so you need to start keeping track of ALL expenses. You need to designate a vehicle, mileage, repairs, fuel etc for the job. Uniforms, cell phone service, computers, internet service, home office space etc. All of these can be expensed out as costs of doing business for whoever pays you. Then when you go to report your income via a 1099 - you have many expenses to reduce your taxable income. Think like a private business working for yourself and what does it take for you to get up, go to work, etc. I think there are quite a few benefits to operate as a contractor instead of earning w-2 wages. All this can be done without getting an IRS tax payer id number.

I am an industrial accountant, not a public accountant, I do not keep up with tax law changes. Basically I agree with bblwi's post above. It is taxable income. I suggest you keep a notebook record of all money received and from whom so you can check the accuracy of 1099 forms when you receive them. If you prepare and file your own income tax returns with a computer program such as TurboTax or TaxAct it will lead you through the necessary steps.

I'm currently working contract with a 1099. I get paid straight cash and it's expected I withhold my own taxes. If you don't at the end of the year you'll find that you'll have some making up to do. I hold 25% of the income currently. Then if you have more held back then you need at the end of the year you've got a nice check at the end of the year (and the government doesn't have your money all year). I prefer this over a W-2 however, I have been at the request of my CPA treating the contract as a Schedule C. This allows me to write off a crazy amount of things. Mileage, gas, vehicle expenses since the only thing I use the car for is the commute, meals, cell phone, etc. etc. There's really no limit as long as you can show the expense is necessary to complete your job.

You are considered an independent contractor rather than an employee.

I have been paid by 1099 the last 3 years. Keep track of all mileage weekly. I have a little spiral note book I write my pay, mileage, and expenses. (Tools, clothes you wear when you work.any safety equipment ect...) if you claim mileage, ( repairs, brakes, tires ARE NOT deductible) the .55 per mile covers all of that. It’s a good deal but you must keep good records. .55 per mile times 100 miles is $55.00 right off the top of your taxable income. If your vehicle gets 15 miles a gallon and gas is $3.00 a gallon it cost you .20 a mile to run it, leaving you .35 per mile for other repairs.

Tax Rate Taxable Income (Single) Taxable Income (Married Filing Jointly)
10% Up to $9,950 Up to $19,900
12% $9,951 to $40,525 $19,901 to $81,050
22% $40,526 to $86,375 $81,051 to $172,750
24% $86,376 to $164,925 $172,751 to $329,850

This is the 2021 income tax brackets. Take a look at your income. Save a little more percentage back then you think you'll need out of every paycheck. Stash it away (savings account, sock drawer)

Thank you Charles. Exactly. Now you get to decide how much tax the Fed state and local get. Your highest tax owed will be your SS tax. Keep back 25 percent. Also remember you are entitled to deductions. Mileage to and from the job. Boots gloves clothing etc.. Record keeping materials etc... Office in your home. Get an account. Make as much as you want. Remember it is your money. Not the governments. The government makes the tax laws. It is your responsibility to use them to your advantage. Be victorious not a victim.

If you are married. Filed separately not jointly. Have your tax preparer run it both ways.

So if you filed it as other income as opposed to schedule C, does the IRS deduct the full social security amount? I noticed your use of the word "technically", lol.

I do my own taxes, but have never itemized deductions before. I'm sure I could figure it out.

Its fairly easy-keep a log book to separate buisness and personal expenses.There are lots and lots of allowed deductions for self employed.
Commercial trappers do it all the time.

Ah yes, nothing better than a Canadian answering questions about US tax laws..................

Not an accountant but I've owned several businesses.

Sounds like your employer is cheating - at your expense. A 1099 "employee" is an independent contractor, not an employee. If you had your own business (it could just be one employee - you), they would hire your company to harvest strawberries and at the end of the year, they would send your company a 1099 form showing how much they paid your business.

However, if they set your work hours, they decide how you pick strawberries, they decide your hourly wage, and they provide the tools - you're an employee and not a business owner. They aren't allowed to classify you as a 1099 employee. They are doing this to avoid paying for workman's compensation insurance, unemployment tax, social security tax, and medicare tax. Since they aren't paying all of this, you will need to pay it at the end of the year. Since you're self employed, it's called "self employment tax" and it includes all of these taxes rolled into one tax. You will pay self employment tax in addition to the regular income tax that other employees of other businesses pay.

If you receive a 1099 you are a sub contractor. You will be responsible for all your SSI as well as all your Medicare. He may be breaking tax law by doing this since a sub must have their own equipment, set their own hours and essentially be their own business. LLL

I think you would need a business license, tax ID number to be a 1099 recipient. Be careful with deductions. I don’t believe deducting clothes is a legitimate deduction. I haven’t ever been able too! But I pay to get my taxes done by a CPA!

And your post is even more useless than mine apparently.

Upon further thought I would not put 1099 income that is paid that way instead of wages it is subject to FICA tax. A 1099 say for lease, rent etc. is not. I would setup a schedule C if you are going to increase your time and maybe for multiple years. They are easy to set up and manage. Say you had a cell tower that you received $5,000 per year on a 1099 that would go to schedule e and is not subject to FICA as it is not earned income. $5,000 for doing work on the farm, harvesting would be however so you need to pay the FICA tax. IRS watches FICA tax issues very close. It is a common way to hide income from FICA tax using 1099s and you don't need to travel down that road.
Thing like other income would be gambling winnings etc.
Bryce