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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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During a 2 month period in 2008 I worked for a service repair

Customer Question

During a 2 month period in 2008 I worked for a service repair company owned by a friend of mine. He is contracted with a manufacturer to repair their equipment. These services were performed in customer's home's. I had no control of the locations or times that these were done. I was just called and told where I needed to travel to to complete the job. This involved thousands of miles of travel in my own car. Not to mention that I was paid less then 1/3 the amount the manufacturer paid him. Recently I received a 1099-Misc from his company. The problem with this is now when I do my taxes it lowers my return nearly $1500.00. I feel as though that company is merely trying to get out of paying taxes associated with the work I performed. I am not self-employed nor do i own my own business. I basically was helping out a friend and now I am being penalized for it. Is there anything that I can do?
Submitted: 5 years ago.
Category: Tax
Expert:  Lev replied 5 years ago.

There are several issues.

First of all as a self-employed - you must report this income on the schedule C. However only net income would be taxable. As you travel using your own car - all travel expenses are deductible.

 

Purpose

Rates 1/1 through 6/30/08

Rates 7/1 through 12/31/08

Business

50.5

58.5

 

Other expenses may be deductible as well. Please verify if you used you own tools, special clothes, etc. You may also deduct travel expenses if you travel away from home overnight.

That is correct - net business expenses are subject of 15.3% self-employment taxes and income taxes, but if you properly account all your business expenses - that may be more beneficial than reporting wages income on the W2.

 

Next issue is - if you was employee of self-employed contractor.

In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.

Facts that provide evidence of the degree of control and independence fall into three categories:
- Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
- 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.)
- 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, after reviewing the three categories of evidence, it is still unclear whether a worker is an employee or an independent contractor, Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding can be filed with the IRS. The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker's status.

 

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