Accepted Answer

XXXXXXXXXX,

It is important to understand that a company cannot chose if someone is an independent contractor or an employee. That classification is determined by several factors. The IRS lists these factors as:

1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

If you do determine the person is an employee, you would have the following expenses (not paid if a 1099 contractor):

1. FUTA- 0.8 percent of fist $7K in wages per an employee, or a maximum of $56 a year for each employee.
2. Employer Social Security - 6.2% of first $106,800 of wages for each employee.
3. Employer Medicare - 1.45% of all subject wages paid.
4. OH Unemployment Tax - Ranges from 0.7% to 9.4% of first $9K in wages paid to each employee. New employers start at 2.7%.
5. OH Disabled Workers' Relief Fund - $0.10 per $100 of payroll.
6. Payroll Service (unless self prepared)- Usually between $20 and $80 per a payroll, depending on which company you use and what services you need (ie, direct deposit, checks cut, etc.).
   

As a 1099 contractor, you would not pay any of these costs. Please let me know if you have further questions.

Regards,

XXXX X

Expert:	Mark D
Pos. Feedback:	99.6 %
Accepts:
Answered:	11/5/2009

Tax Preparer

MBA, CTEC Registered, CPA Firm Experience with Business and Individual Tax Returns and Issues