The IRS Audit Blog

Posts Tagged ‘self employment taxes’

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Question: How do I go about paying quarterly payments for self-employment tax to the IRS? What forms do I need?

I need to know how I go about setting up quarterly self-employment taxes to the IRS? That’s just the 15.3 percent that I have to pay quarterly, correct? I don’t have to worry about income tax and state tax until the end of the year, right?

Answer: You pay quarterly tax on an 1040ES, well, quarterly. It is a payment toward you total income tax.

Different states have their own rules.

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Self Employment IRS Income Tax Rate Information & Help 2009, 2010.mov

Question: IRS Determining “contractor vs employee”?

I worked for a company for 15 months as an Independent Contractor. No taxes were taken out and no insurance was offered.

In that time, I was treated and represented to everyone inside and outside of the company as an employee. I even had managerial responsibilities. Reading up on the issue, I was definitely ‘a common-law employee’

I’m looking to hear from others who have successfully challenged their classification – from Contractor to Employees -by filling out the IRS SS-8 form.

How long did it take to resolve the issue? How long did it take the IRS to render a verdict? What were your next steps after the IRS ruled in your favor? Was other legal remedies considered to right this wrong?

What can I expect?

Thank You

Answer: I think this is one you chalk up to experience. If you did not know the tax consequences attendant on status as an independent contractor, shame on you for not exploring the question sooner. You had 15 months!

In general I would prefer to be an independent contractor, the tax benefits are better, especially the way deductions for expenses are determined for contractors versus employees. But you have to take into consideration the fact that you receive no employee benefits and must cover your taxes from your gross income. Adjust your rates accordingly to provide for the things you don’t get as an employee.

That said, if the IRS does determine you were an employee you would be entitled to a refund of the self-employment taxes you paid if the determination is made and your claim for refund is filed within the statutory time frame (generally, three years from the due date of the subject return).

You might precipitate that determination by filing an amended return (Form 1040X). In that return claim a refund of the self-employment taxes and give a detailed explanation of why you think you were an employee and not an independent contractor. Do a little research at www.irs.gov for information on how the IRS looks at the question and tailor your explanation accordingly.

If you’ll feeling real aggressive you could also claim a refund of the income taxes you paid claiming that what you were paid should be considered as your net income after withholding for income, FICA, and Medicare taxes. And, since you were an employee, payment of those taxes were the responsibility of the employer.

Have fun! You could pull it off with determination and perserverance.

IRS will begin regulation of paid tax preparers

Paid tax preparers will have to register with the federal government, pass competency tests and follow ethical standards under rules that will take effect sometime after the current filing season, Internal Revenue Service…

1099 MISCLASSIFICATION: It’s Time to Play by the Rules