What To Know When Working As A 1099 Contractor

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hi my name is Tom Troma and I work at

solar point solutions here at solar

point we specialize in the placement of

mechanical electrical and manufacturing

engineering professionals I'm here to

talk to you about the subject that comes

up regularly from our contractors and

that is Amaya w-2 employee or a 1099

contractor this is a very important

question and one that should not be

passed up lately

first of all let's define what does it

1099 really mean according to the IRS a

1099 is a self-employed consultant or a

business performing services for other

businesses the term 1099 refers to the

IRS form that you receive at the end of

the year which shows your earnings for

that given here now that we've defined

what a 1099 is who really qualifies

there are many factors to consider but

the IRS looks at three main criterias

the first one is behavioral or who

dictates your daily workflow if your

client determines your daily workflow

which would include the time you start

the order with the task has to be

performed or how to perform the task

that would typically disqualify you as a

1099 another factor to consider in the

behavioral category is whose equipment

do you use if you were to use your

clients computer and/or software this

would typically raise a red flag with

IRS the second main criteria that they

look at is financial as a 1099 you

should be paid per project in that per


typically a 1099 would submit a proposal

and then at the end of the project they

would submit a invoice to the client and

not be paid per hour the final criteria

to look at is the type of relationship

as a 1099 the relationship should be

stated as a quartic or and not as an

employer-employee relationship a 1099 is

not an employee of the client and

therefore you should not receive any

benefits from the customer or the client

such as vacation medical dental or 401k

now that we have defined what a 1099 is

book really qualifies let's talk about

the tax ramifications as a 1099 you are

both the employer as well as an employee

and therefore you would have to pay for

both the employer and employee portion

of Social Security and Medicare tax

currently the Social Security tax stands

at six point two percent for the

employer and employee and in Medicare

tax stands at one point four five for

the employer and employee therefore as a

1099 you know in order to pay for both

of Social Security and Medicare that

stands at fifteen point three percent

another factor to consider is the client

will not be withholding any federal or

state taxes from your paycheck and

therefore you would have to file

quarterly taxes and allocate enough

light to pay for those taxes one more

factor is considered as a 1099 is

unemployment benefits may be 1099

mistakenly believe that they could file

for unemployment benefits at the end of

the project this may or may not be true

in order to collect unemployment

benefits the employer must have paid

into your ample unemployment fund in the

previous two quarters since you are both

employer and employee

no one MIT would have been paying into

your funds so therefore if you work in

the previous two quarters as a 1099 you

would not qualify for unemployment

benefits here the sole point we work

with a vast number of clients and

contractors every year a very common

problem we see is in this classification

and non-compliance of employment status

on both the employer as well as employee

this can result in serious penalties

fines and that taxes the win solo point

protects our clients is to properly vet

and classify every employee for those

who do not qualify as a 1099 we would

classify them as a w-2 employee and pay

their necessary Social Security and

Medicare tax as well as provide them

with liability insurance movement

compensation and because they are a w-2

they would also enjoy the benefits such

as medical dental and our 401k plan to

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