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  • 1099 Nightmare any suggestions

    I recently went from a very busy high priced salon with a horrid boss to a steady averaged priced salon with a very sweet owner i love working there, but now i am on a 1099 for the very first time. i recently went to get my taxes done and didn't realize i would have to pay double the medicare and ss taxes which my accountant said i would have to be setting aside at least 30% of my paycheck every week for taxes I am very nervous with this because i am not making as much money as i was previously and now i am having to pay more taxes and having to do it myself. Not to mention for some reason she thinks that my gross income goes on the "other income" line of the 1099 instead of line 7 the the self employed gross income. which means i can not make deductions my accountant changed that for me but still i am having a huge dilemma of weather or not i should find a different salon to work for that maybe has a payroll or continue to deal with the 1099 I'm very scared i will not be able to afford to continue working there has anyone else had any similar situations? what did you do? i'm so undecided and confused

  • #2
    first question, are you really a 1099 "employee" do you set your own appointments, advertise, carry business insurance. If not then you are really employed by this shop and they should have been paying part of your taxes. There are several threads about this topic on here. Find out what the tax laws are in your state. Even if you like the person your working for don't let that leave you hanging. I'm a business owner and right now it's just me and a friend who only use my shop to groom her favorite clients. She pays me a set % per groom to use my shop and supplies but does her own booking and carries business insurance. If you are a 1099 groomer then start paying estimated taxes quarterly and save all your receipts.

    Good luck
    "I've seen a look in dogs' eyes, a quickly vanishing look of amazed contempt,
    and I am convinced that basically dogs think humans are nuts." - John Steinbeck
    www.wagmoresalon.com

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    • #3
      I have been doing taxes for six years now and specialize in small businesses for people who are just like yourself. your income goes on the gross income line, and you can deduct costs such as tools, blade and scissor sharpening, clothing you wear just in the salon, even cds you bought for the salon. for instance I have purchased cds of serene music, which calms down the dogs, and promotes a spa atmosphere. if you have any questions, please pm me. The federal tax return is the same even though you are in a different state than me. my email address is [email protected] if you need to email me there and I will be glad to help you
      Michelle

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      • #4
        Have a little chat with your boss and explain what's going on. Can she possibly take taxes out? You know, if she makes appointments for you and has any say in your work, you're an employee anyway and she's required to take the taxes out or risk big trouble.

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        • #5
          I have owned my own business' as well as worked for others over the years. There is a huge debate about IC vs. employee. My first time learning the lesson you are experiencing... I talked to my accountant about it... the solution 'for me' was to file for a LLC or INC. Back then it was a pricy thing to do.. now with the internet and so many companies who offer legal advice/services at very low costs it is so much easier.

          By being a 'company' (LLC or INC) you are employed by yourself in a way. If you have deductions, it is through the company. Yes you have to pay your taxes but it can be easier on you if you are a company rather than just a 'person'... I was able to work with my accountant to figure out gas mileage/ vehicle expense, work tools, work related items and even some of my sharpening... What is done now is done but you may want to talk to an accountant about this option. There is nothing worse than having to work at a place you hate... I chose to make a little less but be happy.. it is a personal choice that you need all the info to make. Good Luck

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          • #6
            First question is: Are you a true Independent Contractor?
            What does a dog do on it's day off?

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            • #7
              I guess technically no I am not a true independent contractor, I don't set my own appointments or have my own clientele i don't have to buy my own grooming products the only difference in working at this shop is i am on a 1099 Nothing else has been different I don't even have to answer the phone of take in dogs or send them home like i have had to in the past. This is why i am so confused. I talked to my accountant and he mentioned getting incorporated but he wasn't sure if it was worth my wild he said it is a mess of paper work and he doesn't want to advise me to do it if I i would not possibly be working at this shop for a long time i mean Like i said the past 2 shops i have worked at in the last 4 years before now i had to deal with shop owners that had literally called me stupid, and treated me like a grunt worker, i know i'm a good groomer (i am not cocky) i am not the best but for being 23 i don't think i am too shabby but i tend to get treated like a child by anyone who has been in it longer than me. I just don't want to get taken advantage of being that i have not been experienced in this 1099 thing

              Stephen: Being incorporated clears up the IC issue? No, I don't think so. You are clearly an employee and you work for an employer, and both of you are at risk. We have an article on the board here that the IRS is definitely cracking down on IC's because many actual employers are doing this to save money for themselves, not you. You don't have to incorporate to operate self employed, but your accountant should realize you are not self employed IC. I know many employers that end up in Court for putting employees as IC's and they get billed for with penalties and interest for all the time they said you were IC when really employee. I have client groomers paying off $25,000 to $50,000 fines, penalties and interest, back contributions for doing this, and then of course, the IRS looks at you too. It's dreadful. You are at risk as long as you allow this to go on.

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              • #8
                I have my own nightmare story of being on a 1099 but was treated as an employee. When I went to my employer and asked her pointedly about all the extra taxes I would have to pay because of being a on a 1099, she looked me in the eye and said no, that was false, being on a 1099 wont result in me having to pay any extra taxes. Well I found out differently come tax time.

                I am so sick and tired of groom shop owners cheating the government and their employees. Im really sick of it and cant believe that not only is it still allowed to happen but it is rampant in the grooming industry.

                I am a shop owner now myself. I have one employee who I pay hourly and have my payroll service take out the appropriate amount of taxes.

                Im really sorry this is happening to you. It can be quite a shocker when you think your making 50% but actually you are making much much less.

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                • #9
                  You definitely need to get things straightened out so that you can file your taxes appropriately. The good news is that April 15th deadline can be extended to October if it absolutely has to be. Bad news is that both you and the employer need to come up with money to pay some taxes.

                  It is better to get this worked out before taxes are actually filed. You are an employee, not an IC. Better to fix that status and get your W2 rather than file with a 1099. It's always better to correct it first rather than file wrong. Regardless of whether or not your employer wants to pay those taxes, they owe them. It is your employers choice whether they court issues with the IRS, but definitely it can affect your job.

                  I'm afraid you are stuck in a bad position. You have no choice but to address this with your employer, but they are not going to be happy about it. However, it was their mistake and their choice not to research the rules for an IC before they started paying you that way. However, they may choose to take their mistake out on you. They may even say they've been doing it this way for years. If that's the case, fix your problem and then go find a responsible employer. Be very careful if you seek a new employer, as it is an unusual case where a groomer working for someone else actually qualifies as an IC. I'd be extremely cautious with an employer that does not have you fill out employee forms and withhold your taxes.

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                  • #10
                    does anyone know where the article is i would like to print it out to show my accountant and boss i am very scared about this whole situation. i had no idea it was this much of a mess

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                    • #11
                      Here you go

                      http://www.petgroomerforums.com/chat...1099-IC-Status
                      Most questions regarding GroomerTALK are answered in the Board Help Talk Forum. Thanks for coming to our community a part of PetGroomer.com https://www.petgroomer.com.

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                      • #12
                        thank you everyone for your help i really appreciate it, this is all new to me and i am slightly less confused after talking with you all. I am going to go in tomorrow and talk to my boss about it and decide if i need to continue working there and what needs to change if i do,... or I'll just need to find somewhere else to groom... so if you have a shop in central Florida and need a good groomer hit me up lol

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                        • #13
                          Tat- try not to be scared. You deserve to be treated properly by your boss. Tell him/her you want to be treated as an employee with all taxes taken out. If the answer is no, find another place to work. Not all shops have bad owners.

                          And to those who are thinking of incorporating- there is an $800 government fee each year for S-Corp businesses. Take that into consideration. I'm not sure about LLC.

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                          • #14
                            Both you and your boss could be penalized by the government should they become aware of your situation.

                            Just the other day I saw an ad for a lawyer specializing in work situations. One of the things they mentioned was people being misclassified as IC. This was an ad to recruit people to SUE their employers. A little scary if you ask me.
                            "The most affectionate creature in the world is a wet dog." -Ambrose Bierce

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                            • #15
                              Originally posted by alphipsu View Post
                              And to those who are thinking of incorporating- there is an $800 government fee each year for S-Corp businesses. Take that into consideration. I'm not sure about LLC.
                              Not true, I pay $75 plus $25 filing fee I believe, may be $100 plus $25, I am an S-Corp. It did not cost me that much to start up either, not even close, but I would have to check my records. Maybe it is only in your state?

                              Stephen: Fees can vary by state. CA and a few others are very high.
                              What does a dog do on it's day off?

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