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Ask Merlo Your Own Question
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I am a single owner LLC with one employee. Is it ...

Customer Question

I am a single owner LLC with one employee. What are the advantages and disadvangates of paying him as a 1099 vs regular salaried employee? I am looking at areas such as figuring out taxes to deduct, ease of filing taxes, time involved as far as payroll and filing tax forms. Is there a disadvantage for the employee in being paid as a 1099 employee vs a salaried employee? Thank you for your help.
Submitted: 8 years ago.
Category: Tax
Expert:  Merlo replied 8 years ago.

Classifying someone as an independent contractor versus an employee has tax advantages to you because you will not have to pay the employer portion of social security and medicare taxes which is currently 7.65% combined for the employer. You would also have no expenses for things such as unemployment insurance or workman's comp insurance which must be paid on behalf of an employee. However, you cannot just classify someone as an independent contractor based on the advantage it has to you.

The IRS has set guidelines which help define whether or not someone can and should be classified as an independent contractor. The key factor which determines whether a worker is an independent contractor is who has the right to control the worker as to how work is accomplished? I am giving you a link to a website that outlines some of the other factors that the IRS looks at in determining this classification.

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