1099 Contracting

[Barry West <Barry_West -dot- S2K -at- S2KEXT -dot- S2K -dot- COM>]

>In the late 1980's, the tax code was revised to make 1099 reporting of income
>for contract technical workers more difficult to justify. Seems some
> enterprising souls were getting paid without taxes withheld (1099), then just
somehow forgot
>to treat this as self-employed income and did not pay their fair share of
taxes.

Although it is true that the government cracked down on 1099 contract
situations, it was not because contractors were not paying their fair share of
taxes. It was an effort to protect workers because employers were hiring 1099
contractors to get out of having to pay their share of the social security tax.
1099 contractors are responsible for the entire 15% while employer's are
responsible for paying half the tax for W-2 employees. If you are hired as a
1099 contractor and are then found not to qualified as a 1099 contractor based
on the new government criteria, I believe it is the employer who is held
accountable, not the contractor (If there are any CPA'a out there, please
correct me if I am wrong). You can't hide 1099 income any better than you can
hide W-2 income.  At year end, the employer has to report 1099 payments much
the same way they report W-2 employee income. If a contractor fails to report
1099 income and gets away with it, its only because they got lucky. But the
same is true for the employee who "inadvertently" forgets to include a W-2 in
his or her tax calculation. The point is, I wouldn't avoid work because it is a
1099 situation. There is nothing dangerous about it. Just pay your taxes and
you'll be fine.


Barry_West.S2K @ s2kext.s2k.com @ INTERNET