Fourth, the employer doesn't actually have a choice. If they treat you like an employee, they have to pay you like one. They face [heavy fines](https://www.workmarket.com/blog/11-consequences-of-misclassifying-your-1099contractors) for misclassifying workers as 1099. It's not a negotiation; it's the law.


Working 1099 isn't terrible, you just have to be smart and have two different jobs if you can. One with taxes taken out and one thats 1099. Also, if you are hired as a private contractor, you can write a bunch of stuff off.


This is why my contractor rate is 50-100% higher than my normal job. Hours are sparse, I have to pay taxes, and my free time is worth more to me than my working time.


Only 50-100%? I think some of our contractors are in the $160 range but I'm not sure how much the company skims from the top (we don't do direct contracts). I was billing way more but I was in a fucked up situation so I got out ASAP.


I bill out at $100-150/hr for side work. Never had anyone scoff at it. The range is dependent on for-profit status. GIS for those curious.


Makes sense, I might be way out of my element but I was remembering it being in the $200-$240 range and was shocked the contractors we have get $160. (A co-worker was scoffing at how much money our contractors make, and I was like... huh that seems low and we don't know what is being taken from the top.)


General rule of thumb is that the total overhead an employee costs the company is 2-3x their salary. So a contractor getting 150 an hour is about as expensive as an employee getting 50 an hour


... So here's a chance to ask my question.. Since I left my last job, it seems now that.. fucking **EVERYONE** is hiring just contractors. 1099. EVERYONE!!!! And ALL of them are telling me "Dude, you get to write EVERYTHING off!!" And they are **ALL** offering the same, or less than regular hourly. Like. Everyone. For like.. Every field. I am applying for IT jobs, electrical jobs, sales jobs, etc. I'd say a good 65% or more have been 1099. WITH set hours. WITH a manager. Basically an employee with 1099 status. I didn't know that was illegal. (I knew it wasn't right, but I genuinely assumed it was fully legal because it's corrupt. So duh. Why wouldn't it be legal..? It benefits the rich.) Now I do. Problem is.... The next fucker on the stack of resumes DOESN'T.. So they'll have no problem tossing me, or anyone else aside who actually knows the law. Most of the employers are ALSO making employees pay THEM for cell phones, insurance, etc. I was a 1099 for a courier for a bit. She wanted me to pay $100 for a cell phone just to have PTT (It was ATT with an app..) And the best part... She wanted me to pay UNION DUES.. Even THO.. The union literally wasn't going to do *SHIT* for me. I apparently had to pay the dues so .. I could go to certain places..? It made no sense but was clear that she just wanted to pay people, then take a ton of it BACK. I left there with the quickness and now I try to stay away from 1099.. but it's pretty much impossible.. Also because.. Several of the employers have straight up told me they can't deal with the taxes or the healthcare anymore. So they said fuck it and 1099ed everyone. Plus every employer is now dropping wages like crazy because now *everyone* is gonna be hiring. After this bullshit. *OR* What *I* think will happen.. Most of these companies will realize they did "just fine" with a "skeleton crew" . So everyone else will be canned. Then when they realize they done fucked up... They'll re-hire a bunch. At half the original people's wages. Cuz they prey on people's desperation. Someone who just got canned making 100k a year just nEEDS A JOB.. So they will be forced to take 35k a year for the same job. And that's why the majority of jobs I see on Zip, Indeed, etc. pay less than 40k a year. No matter **WHERE** you live. I JUST moved to Chicago from St. Louis... I'm seeing the same motherfucking low ass wages that you can literally not even live in St. Louis on.. Now they expect people to live in Chicago on them? What the fuck is wrong with us.. Why are we letting this fucking shit happen to us?? We are wage-slaves. All of us. We are fucking stupid. And it's pissing me off. EDIT:: Just for clarification. *******I did NOT get paid more, the union I talked about ***DIIIIDDDD NOOOTHING FOOOOR UUUUUSSS******* She was friends with the union people and literally just had us join just to make extra money for herself. I couldn't even call a union rep or anything. I asked. They did literally NOTHING FOR ME And I still made **LOWER PAY THAN A w2** Which is WHY I only worked there for a week. I was massively lied to. Because they don't give a shit. If you complain they drop your ass and grab the next warm body off the pile.


Damn, I hope you find a career you enjoy. My company is paying us extra right now, like hazard pay. Gave money for home-office supplies for anybody working remote, and is providing a meal per shift to everybody, even the security and cleaning contractors. Your post makes me grateful for that, and i hope more people keep looking for better working conditions and leave the shitty employers to go out of business.




Yeah, exactly, I remember charging $200 for non-emergency work and $240 weekends and meals and travel etc. My dumbass was working salary and was getting super pissed I couldn't do a project and bounce out for a week. I fucking hated that place, so if I smell contract or hours at all, I'll tell their salary ass to fuck themselves. ... So, I'm working salary now... as well as a last job both making really good money but this time around I'm strict about 40 hours a week. If a job needs done, I'll work extra hard to get it done but bet your ass I'm rolling in late or leaving early tell I'm balanced. The current manager is talking the same talk and so will see if its true. (If you work 50 this week work 30 next, or two 50's work 20, etc.)


I'd get that in writing just to be safe


I was a contractor as a first job, making $15/hr The company I worked for was paid by our client $90,000/yr or so per contractor. Lucrative business owning the people and not being a person.


I work for the gov and in a job a while back we contracted to hire a person at $320k per year or 160 equivalent. They hired a dude who commuted from West viriginia for $68k. The owner of that contract was making bank


Oh I could get more, but it's for my old employer and I'm way to busy with children and my day job right now to go looking for more. $150 is probably what I would charge if I was making this a regular thing. Closer to $200 if it was my only job.


This. I was able to write the dumbest things off which helped an insane amount. Literally ever mile I drove to work, was a write off.


That’s not a [write off](https://youtu.be/hg1Uk60rBsc)


Very important comment right here. Commuting miles are not a write off!


Depends heavily on the job and other circumstances.


Yes, exactly. If you drive for you job or if you have to drive somewhere ***other than your place of work***, then some of those miles are deductible. Traveling between your home and your tax home are never deductible, even as a 1099 contractor. See [Publication 535](https://www.irs.gov/publications/p535#en_US_2019_publink1000208625) and [Publication 463](https://www.irs.gov/publications/p463#en_US_2019_publink100033913). >Generally, commuting expenses between your home and your business location, within the area of your tax home, are not deductible. Everyone, please don't take tax advice from randos on the internet, including me. Talk to your accountant or read the tax code yourself.


> Yes, exactly. If you drive for you job Maybe not even then. For example, a pizza delivery driver working for a regular shop would not claim his commute to the store. Only the miles he actually drives while on the job. Though, the likelihood of him being 1099 are pretty slim.


Yes, sorry, that was unclear. Only the miles that a delivery person drives ***after they arrive at work*** are deductible.


Right, but an UberEats driver arrives at work the minute they get in their car. ;)


Exactly, one of my 1099 jobs is uber eats, you track your miles and write off oil changes and repairs and things like that. It all really just depends on the job.


No, you can’t deduct both mileage and maintenance. It’s one or the other.


Yes the mileage is an estimate of maintenance and repairs, depreciation.


To be fair, he didn't say he was deducting the miles. He may just be tracking them to estimate gas, which is the lazy way of doing it and not advisable. Either claim the standard mileage deduction, or save every receipt and itemize. For rideshare drivers, it's usually easiest to claim the mileage only, particularly if you're using the vehicle exclusively for the job.


They'll find it out in a couple years.


Hmmm not sure I was only in a job like this once, I spoke to someone who was doing my taxes at the time and he advised me to document all miles as well. And when I started the position, they also suggest I track my miles. No clue! I legit don’t know much about taxes, let alone working as a independent contractor. It was a short lived job!


You can deduct the miles you drive while actually working, but not the miles commuting to and from your home


> ... working as an indecent contractor Tell me more about this. Specifically the indecent parts.


He was a pimp


Good catch lol. I award you 3 spaghetti points. Spend them wisely!


Your employer was exploiting tax law in an illegal way. If your work is always at one site, and your job is the basically same every day, and you are required to be there for certain hours, you are an employee and not a contractor. They are supposed to pay their half of your income tax (which they shifted to you as "self employment tax"). If you paid money in, you should look into your classification and see about refiling for the money your employer stole from you.


Employees pay *all* of the income tax. Employers split medicare & social security 50/50 with the employee, employers pay SUTA/FUTA.


Oh it's easy. Just don't pay them!


Click the link. It’s a reference to Schitt’s Creek - pretty sure they’re not saying that for real.


Not necessarily true! If you are a private contractor who travels to various job sites throughout the course of your day (ie. electrician, plumber etc) you can write of your mileage!


Yeah driving to your job isn't a write off but if you drive for meetings and appointments during work you can take miles. Though if you don't have enough other deductions to itemize it is worthless.


There are different allowances than if you file just W2 work.


But driving TO work isn't allowed as a deduction regardless. Unless you are literally traveling out of town to a do a job.


I’m thinking of bringing home wares into the store.




[It's a write-off for them!](https://youtu.be/upifaeK0B5U)


i have SEEN these people and i swear i *know* who they are but i can’t place them or the show; someone please PLEASE help me


Schitt's Creek, I'm currently binging it on Netflix


Yeah, its great. I've always loved being 1099.


I've done both, prefer 1099... more choice.


I prefer having a salary and benefits. Literally the first thing my company did when this crisis started was terminate the contract of every single 1099. Hundreds of people got fired in a single day. My company has prided itself on not firing anybody during this. Apparently the 1099s didn't count. I'd rather be protected and get a 401K and health insurance.


I only worked 1099 for a few months out of this past tax year and had over $1,000 claimed on my taxes. It adds up so fast


I mean, yah. They dont withhold anything so you have to make sure you put the money away.....


Oh I do, I set money aside every month so I don’t have a big chunk to pay during tax season


When I was contracting, I set half of everything I made aside as "savings and taxes." Then when tax season came, I would pay from that account, and the sizable remainder was my "tax refund." It's not ideal, but it definitely kept my ass covered year to year.


Or, just set money aside for taxes.


You also get some massive filing benefits if you are making enough for retirement savings. An SEP-IRA allows for max contributions of up to 25% of income and if you run through an s-corp you can self match your 401k up to absurd levels. being 1099 isnt bad. Its just something you have to understand.


The fact that your country's tax code is so arcane that you have to "understand" it not to get ripped off is pretty ridiculous, if I do say so. So many reasons I'm glad I live outside the US where basically every single industrialized country's government does our taxes for us and we just confirm everything's in order by looking at a single internet page and if it's in order, we don't have to do anything. The "tax industry" in the US is immoral and completely held up by lobbying like TurboTax paying off politicians to not simplify the tax code because their entire thing runs off normal people not understanding how the hell taxes work...


For 95% of Americans, filing a tax return on their own is extremely simple, they are just too intimidated to attempt to do it themselves and would rather just pay $100 or so to have it done. For the rest of the 5% it is extremely difficult and it has become that way because taxes are a cat and mouse game. Accountants find a loophole and the government closes it. This back and forth has lead to a necessary complex tax system. Also, taxes are a vehicle for the government to encourage/discourage certain behaviors. For example, the government gives incentives for using solar panels or electric cars through taxes. The government also taxes more for sales of cigarettes. Creating all of these incentives and discouraging other behaviors adds to the complexity.


Idk where you live, but I *gurantee* there are legal ways to reduce your tax burden that are not common knowledge.


I'm not sure what this refers to. A second job with a w2 does nothing about ge tax liability for the 1099 job. And writing off expenses is limited, depends on the type of job you work, and demands a bunch of documentation.


What are some of the differences in the ways employers can treat employees vs contractors? What are some examples of some of the things that would be illegal?




I used to work as a sub-contractor for a carpenter that set my hours, controlled the daily workload, hired and fired, and provided supervisor oversight. All of us were 1099 despite those things. Was he violating the laws by doing that? Because if so...boy have I got a lot of people I could turn in to the IRS. That shit is rampant in construction.


It's rampant in a lot of industries. The laws aren't being enforced and large portions of the labor market are being illegally classified. Drivers for Uber, Lyft, Amazon, etc are seeing a bunch of scrutiny for this.


Uber and Lyft continue to win court cases against drivers who argue that they are employees because the law on independent contractors is pretty simple: uber drivers set their own hours, provide their own equipment, etc. They are not given any employment benefits and very little oversight from Uber. https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee


Let's see Uber/Lyft win this court battle. [The state of California is suing Uber/Lyft and the rest of them for misclassifying drivers as contractors.](https://www.nytimes.com/2020/05/05/technology/california-uber-lyft-lawsuit.html) > OAKLAND, Calif. — California’s attorney general and a coalition of city attorneys in the state sued Uber and Lyft on Tuesday, claiming the companies wrongfully classified their drivers as independent contractors in violation of a state law that makes them employees. > The lawsuit also claims the ride-hailing companies are engaging in an unfair business practice that harms other California companies that follow the law. By avoiding payroll taxes and not paying minimum wage, Uber and Lyft are able to provide rides at “an artificially low cost,” the suit claims, giving them a competitive advantage over other businesses. The suit seeks civil penalties and back wages for workers that could add up to hundreds of millions of dollars. > Although Uber and Lyft have argued that their drivers have independence and decide when to work, the lawsuit claims that both ride-hailing companies exert enough control over drivers to make them employees. In remarks after the lawsuit was filed, Gov. Gavin Newsom of California said he would seek funding for enforcement of A.B. 5 in the state budget and that California had a responsibility to enforce the law. > “Uber and Lyft are traditional employers of these misclassified employees. They hire and fire them. They control which drivers have access to which possible assignments,” the lawsuit says. “Uber and Lyft are transportation companies in the business of selling rides to customers, and their drivers are the employees who provide the rides they sell.”


It's not that the laws aren't enforced, it's that the people working in those industries don't put up legal challenges.


I mean, in my country, workers don't have to put up legal challenges. That puts an undue burden on the workers, who are often the most vulnerable and have the least influence. The government actively goes out searching for companies that are abusing their workers and they lay the fucking book into them. It's great seeing a relatively normal company that you walk by every day on the way to work being raided by our equivalent of the feds and they pull out every physical paper file and every harddrive and USB in an entire building in blue boxes as evidence.


It could very easily be argued you were employees.


It's so unclear the IRS says there's no clear standard. If they paid you no benefits, didn't keep you around between gigs, and *didn't* have any W-2 employees doing the same basic job as you, then they probably could get away with paying you on 1099. Some of the least helpful IRS explanations in the book at this link, if you want to get that bored: https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee


TBH if you can be hired and fired, and the employer controls your work hours, then you're a strong candidate for employee treatment under an economic realities test. At least in the federal 5th circuit, control is the biggest factor.


Employer can control your work hours without controlling your work hours though. They can tell you what time the job site is open. Working outside those hours is not permitted. And can give you a time frame for when the job needs to be completed. So if the contractors gives me an estimate of say 60 hours and I tell him cool job site is open from 9 to 5 and the job better be done in 2 weeks. I have set his schedule without "setting" his schedule.


I was a 1099 independent contractor but my employer and boss always checked in on our work hours, how much we have to make, and kept us working even if we finished .. what the hell I feel so played.


Accountant here. Employees report to a manager, have set hours, use company equipment, cannot leave the premises while on the clock, are consistently paid, and follow company rules. Contractors have set prices before you hire them, choose their own hours, use their own equipment, are paid when work is done, the contactor usually has a legal business/trade, and the business they work for is considered a customer.


I have a question. How does WWE get away with classifying their employees as 1099 when they have set hours for shows, set times for matches, punish wrestlers for being late or leaving early (mostly enforced through veteran hazing though) require them to purchase and provide in ring gear and outfits, paid per appearance and amounts vary by attendance and during PPVs how many purchases are made, not by work of the day and can be suspended without pay for not following company guidelines?


The entertainment industry is a grey area. Talent (actors, camera men, directors, etc) don't work for the production company, they have agents. This allows them to work with different companies, do sponsored events, and generally jump from job to job without getting dragged down in employment paperwork. They are paid a lump sum for doing a particular job/event which is negotiated beforehand and don't work for one place long term. It is legal to hire as contractor for an event that has a set start and end time, even if it's regularly scheduled. Contractors also have to provide their own gear. For the other stuff, that probably has to do with a contract. Like, wrestlers might not work for WWE per se, but they might have signed a non compete. Or "the event is from 10am-12pm, actor must remain on site or be docked 10%" clauses. Being a contractor is industry standard, so they can bend it using legal loopholes.


They're likely contracting with a business org set up for the wrestler(s) too, not necessarily directly with the wrestler. Don't forget that you're also generally given less scrutiny at the higher end of the pay scales... the w2/1099 concern isn't about screwing the IRS, it's screwing the employee. The wrestlers have agents and lawyers reviewing the contracts so in terms of people being taken advantage of they're pretty down the list. Odds are if you have a lawyer looking over your 1099 contact it's to your advantage to not be on a w2, but having good advice isn't the case for most people making $50k.




If they provide you with a set schedule or offer you direction i.e. specific tasks which you must complete. An easy way to look at this is if you were a taxi driver (almost always 1099 because no taxi company could afford workmen comp on drivers, which you'll note isn't an issue of taxes). The company has to offer you work, offer you fares, offer you a schedule, not require you to work, or even require you to provide service to their customers. You must be free to lease their vehicle & park it in a Walmart parking lot eating cheetos & sleeping for 10 hours, OR accept work from them entirely at your discretion.


Fifth, an independent contractor is not covered by the Americans with Disabilities Act, so they can theoretically fire you without cause if you are not an employee.


Any job can fire you without cause, you'll just be able to claim unemployment when they don't have a valid reason.


Wow, government regulation to protect workers is great!


Fines are very much a choice that businesses make. If I am facing a $1000 fine for doing something illegal, but I’m only 30% likely to get caught, and if I get away with it I make an additional $900 profit, a business is going to take that deal all day long. Companies may face heavy fines for misclassification, but they actually rarely pay them.


Tell that to the WWE


Agreed with your sentiment, and that any prospective employee (actually, contractor) needs to be fully aware of what that relationship looks like compared to a “traditional” hire. That said it can be great. I sold insurance for awhile under a 1099, and both myself and the company (usually) looked at it like a partnership. I got access to a lot of their resources, I sold their policies, and they gave me commission money. The very rare times the company would try to dictate my time (usually in the form of “we need you to go to this dumb sales pep-rally,” which I never had any interest in attending), I’d remind them of our relationship particulars and politely pass. Plus I got with a CPA when I took the position to figure out what I needed to be doing with my money. Easily set up a second account that would pull a percentage of my paycheck (depositing the rest in checking) for quarterly taxes. Plenty of my peers hadn’t done that and had nasty surprises waiting come tax time. The IRS does *not* fuck around about getting it’s money.


Came here to say something similar. I officiated basketball games on a 1099 for years and the way it worked out I paid far less in taxes than I should have due to the deduction you could take as an independent contractor. OP's point is absolutely valid and people should be wary of any 1099 employment but it's not necessarily a deal breaker for every single job.


1099s not being a deal breaker only requires one thing: honesty from the employer. If they would quit with the lies people wouldn't keep associating "independent contractor" with "got screwed on taxes" Never ever ever ever will anyone outsmart the IRS, they know exactly what loopholes actually exist because they wrote the rules. Employers lying to their hires about tax status ends up not actually mattering because the IRS will get you classified properly


If you make enough money on a 1099 it might be interesting to look into creating an LLC and collecting a profit ~~paycheck~~ from the company you own. I'm NAL and this is not legal advice from what I understand it also places limits on your personal liability, ie if someone who contracts you has a reason to sue you they can only sue the LLC and not get to your personal assets. Edit: It's been noted that you don't pay yourself a salary from an LLC. That's why you should consult professionals and not the internet.


You can’t pay yourself a salary as an LLC member. You’d have to either file an election to be taxed as a corporation or just form a corporation from the start.


Going S-Corp has some great benefits where you shield personal assets, can draw a salary, but can also collect dividend payments on corp profits. Id suggest my own S-Corp over 1099, and bill via invoicing any day of the week.


positive of S-corp is the dividends are unearned income and not subject to payroll tax. But if you are going that route you need to make sure your paycheck is reasonable. You can't be making a bunch of money and then claim your hourly pay is min wage. It has to be in the realm of what you would roughly make if you worked the job.


Yeah IRS is pretty strict on the salary part, for exactly your reason. Otherwise all small business CEOs would all be making 7.50 an hour haha. Also, it's more expensive to be an S Corp (excluding tax and liability things). So, you've gotta have some sort of consistent operation going before it's worth it. No reason to pay 3k extra in accounting fees to save 2k in tax. Unless you really love your CPA and if that's the case, call me!


I misused or misinterpreted pay-check


No big deal. Thanks for the correction.


Definitely not a bad idea to explore...if I were to do it again I’d pay the $250 to ask a lawyer about it.


You also get to write off a ton more when you have an LLC.


There is no difference between a single-member LLC and an individual contractor as far as taxation goes. The IRS literally designates them as “disregarded entities.”


Yeah, thanks to the latest Tax Law a lot of employee and contractor expenses got junked. I came across this with Uber and Lyft drivers. Lyft was a bit better dealing with their driver's tax responsibilities than Uber.


And there are legal rules if employer can hire you as 1099 or w2 right? 1099 means you pick your own work hours, like Uber and Lyft drivers.


As a side note, often times you make more money in salary as a contractor since the company isn’t paying taxes, insurances.


People should be educated about what status they are in, 1099 or W2. IRS is extremely clear in their guidelines. W2 has expectations that you work for me, you are always available, you need to clear time off with me, etc. 1099 is more of a "can you provide this service for me". I don't tell you when to do it or what materials. A lot of small businesses do 1099, it's not unethical. However 1099 is always paid more than W2 because of the tax issue, and because of no benefits. So if you are a wage slave and a mindless drone doing 1099 for a contractor, you are getting screwed. If you are a business person providing a service for higher $$ then 1099 may be a good fit.


The way I think of it is "Do you have a boss or a client?" If you have a boss, you're an employee and should be paid on a W2. If you have a client, then a 1099 is appropriate.


Perfectly stated


It's way more complicated than that, and even the IRS shrugs its shoulders at it: https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee


I will counterpoint as someone who used to be a gig worker and got out partly due to this issue: if you read the IRS guidelines there are plenty of grey areas. The way the guidelines are stated its not like an official checklist yes/no for what constitutes 1099 vs W2. There is intended room for interpretation, which gets exploited by companies. And no, 1099 is not always paid more than W2. If that were true I would still be gigging.


But wait, there's more. If you pay hour taxes quarterly but accidentally pay the wrong amount, because it's an estimate based on what you made last year, you can be hit with a huge tax bill that you likely won't be prepared for. If you get hurt on the job, the employer's liability is limited. Your access to social programs like unemployment and FMLA is limited or nonexistant.


If you pay 100 percent of last years estimated taxes there is no penalty no matter how much more you make. E.x. $2500 in taxes for 2019, you pay $625 every quarter and you can’t be penalized for 2020.


Correct. But if you end up making more this year than last year, that won't prevent you from getting a big ol' tax bill that you may not be prepared for.


But there really isn't any excuse to not be prepared for your extra tax liability in that scenario. It's not like you wouldn't be aware that you earned more than you did last year. Did you think that extra money wouldn't be taxed?


If you're not keeping up on your accounting and not running a quarterly previous year comparison, you deserve to get burned. You make more money, you owe more taxes. It's pretty simple.


Reading this thread makes me realise how nice it is to not have to deal with all this. You guys need tax reform in your country, all this is way too complicated. No one should have to be doing all this work just to pay their taxes correctly. The government should be telling you how much you need to pay, not letting you figure it all out for yourselves and then fining you if you do it wrong.


Even as a full employee (non-1099) in the US, you still have occasion to file estimated taxes if you have capital gains, so you aren't avoiding it if you happen to have sold stock (for example). Some friends of mine sold some stock in order to build up their house down payment and did not make any estimated payments. They got fucked in the ass hard by both federal and state on their return.


It works like that for literally everyone. If you don't withhold enough you're going to get a bill.


So if you’re self employed you HAVE to pay your taxes quarterly?


This is super simple to avoid. Just set aside 30% or so each payment you get, and pay your estimates with it quarterly (takes 5 minutes, all done online). If you over pay, you'll get a refund. Want to pay less taxes? Get a sep-ira, or individual 401k and contribute the max you can to reduce your tax burden. 1099 can actually ve a very lucrative arrangement if you know how to take advantage of it.


Jesus Christ everything in this thread is the worst tax advice I have ever seen. Especially this piece of it.


And your post is even more useless because it doesn't actually say why.




Doubt anyone will see this far down but FYI **here is how to not pay 50% of the extra taxes when you are 1099'ed** If you make enough as a 1099 contractor it is worth it to set up an LLC and tax yourself as an S-CORP, basically normally a 1099 you file a schedule C which means you have to pay unemployment tax on your earnings (about 16 pc) but setting up an LLC/S-Corp you can save about 50% of your unemployment tax by having half of your money being paid to yourself as a salary (still 16% taxes) but the other 50% you can give yourself as dividend/pass through payments, which means NO self employment taxes...so you basically pay \~8% self employment tax on the income as opposed to 16% You will need a tax person to set this up for you, most likely, unless youre super familiar with all the paperwork needed. It was like greek to me when i first did it, but now I can do all the stuff myself (paying myself a salary, W2, etc) and my tax guy just does my final taxes at the end of the year and i just send him all the stuff i filed myself Edit: 50 pct is approx what you’d save. It’s more complicated than just getting 50 pct off self-employment taxes but didn’t want to get into the weeds too much.


The tax system in your country is *insane*! How do you manage to do all this without fucking it up every year? Where I'm from they just take income tax straight out of your pay each month, no need to file anything. If you are self employed it's a bit harder, but it's still literally just a small form and that's it. You guys have so much bullshit to go through. Surely it's in the government's best interests to make taxes simple?


There have been bills introduced to allow the IRS to use the information it already collects for enforcement purposes to pre-fill tax returns. That would amount to "automatic" taxes for most people. The tax prep industry spends a lot of money to maintain the status quo.


> Surely it's in the government's best interests to make taxes simple? because the government is controlled by corporations and they don't give a shit about making things easier for small businesses


Yes if you are a W2 employee it is that simple for most people....


You get an adjustment of 50% (what your employer would pay) on page 1 of the 1040 for your share of FICA and then pay the whole amount 15.3% under payment section page 2. Self-employed also get to take their health insurance as an adjustment, all their expenses (supplies, equipment, office space allocation, insurance, tax, cell phone) is subtracted from their earnings on a schedule C. The new tax law also gave them a 20% bonus called 199A for being self employed that is added to either their standard deduction or itemized deductions. It can be a good deal...but your right you have to set aside your own taxes. Oh the best part of being self-employed is you can open a SEP ( self employed pension) for up to 25% of your earrings or max of $56,000. This is subtracted from your income if you go the traditional route which then lowers your FICA taxes.


Or, even better a solo 401k which you can contribute to as an employer and employee, all of which is deducted from your tax bill.


OP definitely isn't wrong here, but being 1099 shouldn't be a deal breaker if you know what you're getting into—for a lot of work, this is pretty normal, and you'll be fine come tax time if you've prepared for it. You just have to think of yourself as a business instead of as an employee. The first year I was doing this, I totally didn't understand this and got hit hard in tax season because I wasn't planning ahead. I'm a freelance photographer, and work for a number of clients who 1099 me (the local papers, the local NBA team, companies that hire me to do product/lifestyle work, etc). Then, on top of that, I track and report income for people who aren't sending a 1099. Since taxes aren't coming out of your pay, I find the easiest strategy is to set aside a percentage of each job in a separate savings account. Know what deductions you can take and keep spreadsheets to track them (miles driven, equipment purchases, business associated meals, professional memberships, software, bills associated with necessary services like phone and internet, vehicle maintenance if you use your vehicle for business, etc—there are more deductions, of course, but those are the sorts of things you need to track throughout the year). If you're diligent about "taking taxes" out of your own checks, then what you owe doesn't sneak up on you. I basically always have more set aside than I actually need after deductions, so I can give myself a de facto refund if I've done everything correctly. If you do this, you also have to factor in your costs for health insurance and your retirement plan as well. It's more work to keep up with than being a normal employee of a place, obviously, but if you choose a different way to pursue an income this can definitely be done with some planning and diligence on your part.


This. My brother cuts hair for a living and doesn't raise an eyebrow to the gig-economy "scam" induced influx of 1099 workers. He's been one before and still is. But he's careful and like you said, he knows what he's getting himself into. This led him to co-owning the first barbershop he worked for and now works at one of the most reputable NYC shops; $50-$75 for a normal cut, 100+ for home visits or walk-ins. Had he said no because it's a 1099 job, who knows where he'd be now.


Definitely. OP is totally right to point out what they point out though, because there are employers that will hire contractors for their own tax purposes, but it definitely isn't always bad and can lead to future opportunities that don't exist in more traditional employment structures. Before I started my photography business, I did a bunch of InDesign work remotely as a 1099 employee when I finished grad school in what probably should've been a full time position, and I definitely wasn't handling my budgeting the way I needed to be. If I had understood the implications better then, I would've been better prepared, so I'm glad this post exists. Of course, I also learned that being a 1099 employee comes with plenty of perks—setting your own hours, for example. And also, once you figure out that you have a valuable service that you can offer and you know what taxes are going to look like, you have to set your rates accordingly. For me, it really only clicked once I realized that I wasn't anyone's employee, but was instead a business of one (and, for me at least, that I needed to move into a field where I wasn't just doing work for one employer).


As a 1099 you will be excluded from benefits, including health insurance, which can be a shock worse than the tax implications.


If you're anything but full-time you might also be excluded from certain benefits.


Even if you're full time you can be excluded in some situations.


Doxxing suxs


Worker’s compensation and unemployment are the ones that really bite people in the ass


Worker's Comp depends. A "1099" is a subcontractor. An actual true subcontractor (someone that is their own employer, sets their own hours, and is under their own control) can still be covered under worker's compensation in dome states/situations. The example OP is eluding to is an employer having control over the "1099" workers schedule, pay, hours, etc. but is trying to play the "they're not an employee" game. These workers absolutely would have worker's compensation rights as they're employees despite the employers best efforts.


Guys. If you set it up right and can get the right billable amount then this is an advantage. I’ve been doing this for years and have benefited from doing so. I’ve had numerous W2 offers and I turn them down, not just because of money but I hate performance appraisals, the company culture, team spirit, blah. LLC taxed as an SCorp and get a good accountant. Knowledge is POWER.


Exactly. This is actually a good thing. If you are an independent contractor, you qualify for a 20% pass-through deduction called the QBI (Qualified Buisiness Income) and is a major tax incentive for being self-employed. This is exactly how I file each tax season. In fact, the benefit is so amazing that I don't even bother filing estimated quarterly taxes, as you mentioned in point #3. The penalty is like $200, even though I just saved like $6,000.


So true, in college I got roped into an MLM where we were "branch managers" they even had seminars about how *great* it is that we're 1099... just look at all this did you can write off! They told us, I was an accounting major about the time they advised us to pay employees just under 600 (at least officially) they don't need to be recordedas employees I just got up and left


Wow this happened to me when I moved to a new city and never had a 1099 job before then. Had my dad call one day telling me to bring home my pay stubs and he’ll keep them for when I need to do my taxes. My reply? ..aha pay stubs? It was April and I had NOTHING saved. Luckily it wasn’t too bad when I had to pay my taxes and my parents were kind enough to help me out. I had the same issue this past year until I finally quit in September and now have a “regular” job with taxes taken out of my pay. It honestly was the most stressful financial year of my life. Don’t recommend.




I’m a 1099 employee and I pay WAAAY less in taxes than I would if I was W-2. I get to write almost everything off as a business expense with zero issues. I’ve been working like this for 15 years and have saved a small fortune because of my lower tax liability.


Not everyone wants to do the work it entails. And yea it might not seem like much work to you but you gotta remember people are lazy. If it means doing less work people will gladly pay the price.


Watching Reddit slowly teach itself finance and taxes and getting mad about it is my favorite pastime


There are some clear and well-established rules about who is a contractor and who is an employee depending on the circumstances and agreement of the employment (often regardless of what your employer calls the nature of the employment relationship), and the IRS and the labor agency/tax collectors of the state you live in would be very interested in talking to you and/or your employer about those differences. Employment law and taxes are not a joke, and those discrepancies can make or break careers as well as activate the taxman's tax-senses. Edit: added a bit for mild clarification. Edit 2: editlectric boogaloo. Edit 3: Return of the edi (mostly I had to change Edit 2 to "editlectric boogaloo")


Self-employment taxes are a *bitch*. Source: I was “self-employed” in my 20s by an employer who paid via 1099. I won’t ever do that again.


I once took a job for a guy that did this. We had a salary + bonus agreement but as I was his first employee he didn't have payroll in place and asked if I'd 1099 for 2 months while he got everything in place. Sure! Fast forward to bonus time a year later and suddenly it's not actually been a full year because I wasn't an actual employee for another 2 months. Fuck you dude. I try to to help you out and you turn it around on me to fuck me out of a bonus? What an asshole. That situation didn't end well. Then he fought my unemployment and lost. Then I reported him to the IRS for pulling this shit (it's illegal to pay someone as a 1099 but have certain employment conditions). I really hate people sometimes.


If someone is offering to employ you 'under the table' by not taking out taxes but still wants your social security number, this is why.


Also, you need to change your client sales tax according to your state and county’s laws. Also, the amount of federal tax you need to pay is double what you’d normally need to pay. Let’s say you normally make 75k as an entry level computer programmer. Someone offers to pay you $40/hr on 1099, which they claim is equal to your paycheck and four weeks vacation. But you normally owe about 25% federal taxes (income, Medicare, social security), or about $18,750. And your state has a 8.25% sales tax but no income tax. A comparable health insurance plan costs $850/mo, and you will pay 3% to collect the money from your client’s credit card. In this situation, you’d need to bring in $37,500 per year to cover your taxes, $10200 to cover your health insurance, 56,250 to replace your salary, and add 11.25% to cover merchant processing fees and sales tax unless you call them out explicitly. (If you don’t call them out explicitly, this should be spelled out in your contract that you’re covering that cost.) So you would need to charge at least $54/hr to cover the same costs as a salaried position and then you need to charge more to cover the risk of being a contractor with no certain paycheck if hours are reduced or the contract ends. This isn’t including retirement savings match, which is normally at least 2% of the $18k or so you can stuff in there a year. You should add that in as well. As a senior engineer making six figures, my 1099 ask is a decent amount above $100/hr.


At a certain income point 1099 is a massive benefit. The absolute best is to form a corporation, and pay yourself a salary from the corporation. Pay for things that can be expensed out of the corporate bank account and save all receipts. Pay yourself a dividend quarterly on the "profit" of the corporation. Fairly easy to pay less than 25% total income tax on 100k income this way. But yes, an 18 year old just getting into the work force and taking a 1099 job is absolutely something to be careful with.


I've been a gig worker for 14 years. Always get 1099s. Never got fined for not paying taxes quarterly. And, most of the time, if I make less than $600 on a gig, I don't get a 1099.




There seems to be a lot of comments telling us why 1099 is actually better. That’s not the point. The OP is 100% correct in regards to the instances when the employer says “for tax purposes”. It absolutely benefits them. And best believe, the government is gonna get their money. So you pay your normal income taxes on the 1099 earnings, then self employment tax, but the real difference is that the employer isn’t matching your social security and Medicare contributions like they would if you were an actual employee. Also note that the average person doesn’t truly understand write-offs. They’ve just gotten away with it. FYI, I do this for a living. Take those comments with a grain of salt.


A company I interned at did this to me. Of course, having hardly any working experience I didn’t understand the distinction. Turns out I was making less than they told me due to the increased tax obligation. When I brought it up they pretended to not know about the higher taxes and more difficult tax filing process on my end. Incredibly unprofessional and looks like a really cheap and pathetic way to save a bit.


5. You can't collect unemployment if you're unemployed and have been a 1099 employee for the year.


No longer true thanks to the recent change in Unemployment laws. Self employed (aka gig workers) can now get unemployment.


You make a good point. You need to be meticulous about saving all receipts and organizing them carefully. It does take more work, but totally worth it to me. Last year I went on vacation with a business meeting carefully scheduled in the middle of the trip, excellent write off. The work was documented properly in case of an audit.


My first boss was a total scammer who ran a for-profit "eco-friendly" landscaping business out of a non-profit space. Made me file as an independent contractor so I ended up paying $1200 in taxes for $8000 in income.


I was 1099 once and my first year of my career I paid back an absurd amount of money for taxes for how little I actually made.


This actually works out really well if your in the UK.


At my current place of work (Boutique Architectural Firm) my employer hires everyone on a “90 day” 1099 “contract”. I put that in parentheses because: 1. He has never written up any official contract for any employee, ever 2. He has never kept his promise of 90 days to any employee, including myself. For instance, he kept me on 1099 for nearly 9 months, and during Tax season I owed thousands of dollars and it nearly ruined me financially He has kept other full time employees on 1099 with the promise of putting them onto W2 for years. Putting people on the schedule, making them work the front desk/shop. Asking them to do tasks over weekends, etc. This is the tip of the iceberg for my employer, who is a nightmare to work with. What sort of legal recourse is there for employees experiencing similar conditions?


My parents did this to me when I worked for them. They also recorded that they paid me much more than they actually did so I ended up owing over 3,000 in taxes while coming home with just over 10,000. It didnt help that they paid me in cash so I had no record of the money except what they recorded.


Recent "CS" college grads and code camp kids need to be taught about this. Their schools sell them on the idea that that will be making 80K+ the day after they graduate. The reality: a few kids find those jobs. They are for contract work. Shitty grunt work the real devs don't want to do. You have no benefits. They will only use your services for a max of 3 months. The case where someone is actually hired by the company is the exception.


So true! This is what my last employer did. Claimed coronavirus caused budget issues (their poor planning, over hiring, and expanding too quickly is what caused the budget issues), then fired a bunch of people and immediately offered us “independent contractor” positions, so we lost our heath insurance and benefits. Doing the same exact job for “20 hours/week”, while heavily implying we should do more. Required set days and set times that had to be approved. We still have supervisors and our work is checked. The employer told us we should get max unemployment to complement our 1099 pay. Except if we are honest on our unemployment claim, we won’t get anything at all. They offered me the deal and I walked away, and I was the only one who did. I had a huge client load that translated easily to 10 hour days every day, if not more, so I knew there was no way I could get my work done in the 20 hours per week, and I wasn’t willing to commit unemployment fraud. Not only that, they got a PPP loan and didn’t change anything, and also aren’t paying rent right now. Bunch of assholes.


As someone that has spent many years as a 1099 employee, through a forestry company, I'm incredibly grateful to my boss for being totally honest with me and sharing his method from before he was the boss. He told me to open a savings account, and get the highest possible interest rate I can find. Then, every paycheck, have my direct deposit set up so that at least 30% of my pay goes immediately into that savings account Now for the most important part: treat that savings account as money already spent. He told me to buy a fireproof safe and put all of my tax paperwork, relevant receipts, pay stubs and the debit card to the savings account in the safe. Not even in the case of absolute extreme emergency am I to take the card out of the safe before tax time. Then come tax time, take the safe to a reasonably priced tax service and have them get me the most deductions humanly (and legally) possible so as to decrease the amount of taxes that I owe. Then, and *only* then, may I use the debit card.... To pay my taxes. Every year, I have a decent amount of money left over. I treat that as my "tax refund" for overpaying the entire year (even though I'm only paying 'imaginary' taxes until tax time rolls around), and I can then either enjoy my tax refund OR roll it over to the next year. I never, in the nearly 10 years working for that company off and on, owed more taxes than what I had put aside the whole year. That being said, I've seen A LOT of younger people come through acting like they're making out great by not paying taxes out of their paycheck, and they ignore the advice of our boss, then comes tax time and they owe a few thousand dollars with nothing to pay the debt with. Then they cry that they can't renew their driver's license, etc because they owe back taxes. 1099 doesn't mean "tax free" pay. It just means *you're* responsible for paying at tax time.


I’m 16- I took a job last summer putting flyers on door knobs. 1099 with a pay rate of $10 per hour. Better than minimum wage. When I went to do taxes, I realized I didn’t make enough money to have to file. So... win


As a musician I worked as a 1099 employee for 10+ years at one place. Yes I had to pay extra in taxes and got no benefits but I made twice as much than others employed “normally” at similars jobs. It definitely depends on the employee, there are plenty who try to take advantage of people’s lack of knowledge but there are also plenty who have a system that works well for both parties.


1099 isn’t a bad thing if you actually have stuff to expense.


I think this is more addressed to people that work as employees, but get 1099. So they wouldn't have normal business expenses. They'd have basically nothing to call expenses.


this thread is worrying me. My GF just moved across the country to live with me and start a new job. She’s an employee getting paid $20 hr which was a lot for what she does.. She told me today (she started her job today) she got 1099 and is confused. No idea what it meant and now I see this. Is she getting screwed?


If you are independent contractor you provide the tools used the milage used etc. it isn’t just a shift in tax. You’ll need health insurance, insurance against loss of earnings, liability insurance, etc.. But if you are excellent(top 0.000001%) at what you do you might be able to make the prices for your service and end up like the buffett of your profession.


worked for a sketchy landscaper woman who had us all as “independent contractors” and was it was an actual nightmare. she should be shut down


Yep found this out this past tax season. Not knowing it was at 1099 at sign up. I was desperate for the job, thinking it was a w-4. Didn't find out til weeks later that's how's the owner operates. I should have known better due to the hand written checks each week. Had to pay over $500 in taxes which where taken from my return this year.


I wonder how hiring people as 1099 impacts the employer when they need assistance from the government, like right now. Do they qualify for less money because of the tax obligation they passed down to the employees?


Serious question: My SO works in real estate/property management, and his employer pays him a salary, plus they pay him a commission for each lease that he secures. The company pays his commissions under a 1099 and they made him open an LLC to pay him these commissions. Meanwhile they direct deposit his regular paychecks into his personal bank account. My SO’s tax guy told him this is illegal for the company, but he thinks he doesn’t have another option if he wants to stay employed with them and still make his commissions. He understands he’ll have to pay the taxes himself, but he says he’s fine with it. What should he do? Does he need to do anything?


This happened to me about two years ago. I found this woman that was in need of help to build her bakery business. She seemed to love my creativity and wanting to expand her business with me, seemed like a dream come true! A few months in and she started to treat me differently (even after a raise and promotion) and fired me when I got back to work after a serious illness (I had C Diff and definitely could not work around food). Turns out she wanted ultra cheap labor and wasn’t actually interested in me as a pastry chef. The 1099 should have warned me of that. She also didn’t file her paperwork properly, so I ended up owing $700 for three short months of part time work. What a sham!


My former boss tried this shit and acted like it was better, we told him no and that it was illegal and he dropped it. If you're not a contractor you can't be taxed as a contractor.


Did this for a job. Their excuse was basically they didn't feel like doing the proper employee paperwork. Almost 2 yrs later, ok we are going to make it legal now. Small business are just as crooked as big ones.


If you're on a 1099, you should be getting more than you would normally.


YSK your employer doesn't determine if you're a 1099 or not. There is a set of rules that determine if you're a 1099.


I have been a tech in telecommunications for well over a decade(cable guy, satellite guy). I have worked both sides of the system and i much prefer 1099. As an hourly employee directly for a company with everything provided + benefits you can expect to make 15-20 dollars an hour. Not bad, not good either. As a contractor, nothing provided, i generally make about 40-50 an hour. Of course i have to drive my own truck, my gas, i buy the wire and tools, insurances and so on. When all expenses are taken into account you can knock off about $10 an hour. So a more true rate of 30-40 an hour. I will take twice the money anyday over things like paid vacations, holiday pay and so on.


"Sure! The price is double, though, for tax purposes."


I had this happen as a clueless 17 year old. Thankfully my parents knew enough to tell me what was happening. After threatening to leave they ended up paying me as a regular employee. They were banking on me NOT knowing this information


For those saying “that’s illegal”, that’s literally how I was hired for my work study job on campus. And yes my taxes were a rude awakening. I didn’t realize my wage was effectively much lower than advertized and may have taken a different job.


Every college yoga teacher is losing their mind right now.


I've walked out of plenty of jobs because of hearing "oh you'll be your own boss and file a 1099..." Deuces, I'm out, fuck off. I should have known better when they asked me to show up in "business professional" and I do. Full suit and tie professional. The guy looks at me and says "bro, you're dressed better then me, you should have my job! I said business professional, see how I'm dressed??" And he points down at his polo shirt and khaki shorts and says "this is business professional" And then they hired me purely off the fact that I owned a suit..... Still cant believe I accepted that job, stupid things you do at 20


Also important to note: if you work under a 1099, you need to file with the IRS every quarter, not just at the end of the year, or you’ll have to pay late penalties. I worked Instacart as my only job one year. Ended up owing almost $2000.


Is your employer breaking the law if he/she hires you as a 1099 but pays you hourly and tells you not to look for a second job?


I’m not an attorney or really anyone smart enough to confirm but I know that sounds pretty sketchy


Don't forget it's also so that they can let you go at any moment, for any reason, and you will have a shit time with unemployment because you weren't an employee to begin with.


This happened to me this tax season. My federal tax income was 0 and when I confronted my job they said I opted for nothing to be taken out. I only owed like 700 but it still took a chunk out of my expected return


And this is why people murder their bosses


I worked as a bouncer/barback for over a year and they paid us 1099. It was cool because we got cash at the end of the each shift, but taxes were a nightmare because for my state we had to pay a six hundred dollar “small business owner” tax. Thankfully I had a film time job and my return from that covered my taxes for the bar.


I fell for the 1099 scam on a temp job back in 2007. It took me two months before I received a check directly from my new employer. (Large corporations aren't necessarily prompt in paying their contractors.) Then I had to pay estimated taxes quarterly, because none were taken from these direct checks.


My employer at a flower shop had me fill out 1099 instead of a W2. She set my hours and I only did work from the shop. This woman asked me to quit school twice to work for her full time and make $11 an hour. She said I was both a temp employee and an independent contractor. I got royally screwed on taxes. Any ideas on how I can report her and her business? She also never gave us breaks during our 8 hour day


I wish I knew this before taking my previous position. I fought for 2 years for "direct hire" only to have them cut my wages by MORE than the tax difference. So they screwed me twice. Then they let me go shortly after the viral outbreak due to "missed revenue opportunities from canceled lead generating conference events." In the 3 years I was there we likely pulled 1 decent lead from any of those events and paid far more to attend then we made back in those leads. It's going to be fun trying to find a job paying anything even close to what I was making which was $12k less than I was making at my previous job. Rent, utilities, and food sure haven't gone down though.


Used to work for a daycare like this. Never again!


This happened to me. Hired as a 1099, given a 40 hour work week with set times. Micro managed by a boss who was an absolute lunatic. Was told it was better for me because I could "keep all my money". At the end of the year when I went to do my taxes, I originally owed $4,000 which was pretty much my entire savings. Thankfully someone was able to help me dwindle that down and file for expenses. But fuck that boss.


OP seems to be implying people on 1099 as opposed to W2 are paid less. That isn't accurate. The exact opposite is usually the case.