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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28920
Experience:  Taxes, Immigration, Labor Relations
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I OWN MY OWN BUSINESS AND WOULD LIKE TO KNOW IF I CAN WORK

Customer Question

I OWN MY OWN BUSINESS AND WOULD LIKE TO KNOW IF I CAN WORK UNDER MY BUSINESS AS A SUB-CONTRACTOR. SO THAT WHEN TAXES ARE DUE I CAN SHOW THAT IM EMPLOYED AND PAYING MY TAXES WITH A 1099 FORM.

ALSO SHOULD I BE ADDING FEDERAL TAX% TO EACH OF MY JOBS JUST AS I DO WITH STATE TAXES 4.167%
Submitted: 4 years ago.
Category: Tax
Expert:  Lev replied 4 years ago.

LEV :

Hi and welcome to Just Answer!

LEV :

How your business is organizeed?

LEV :

How your business is organized? Is that a solo proprietorship? LLC? Other?

JACUSTOMER-js70kika- :

My business is a s-corporation.

LEV :

As an employee of S-corporation - you should receive reasonable wages. S-corporation should pay employment taxes. These wages are deductible for S-corporation and are reported to you on W2 form.
The remaining profit is reported to you on schedule K-1. That income is not subject of self-employment taxes.
There is no need to subcontract with your S-corporation.

JACUSTOMER-js70kika- :

I am not an employee of S-corporation. I was told to join an employment agency so that I get a regular pay check with taxes withheld so I can deduct at year end.

LEV :

Indeed the IRS treats you as an employee of your S-corporation.
Please see for reference - http://www.irs.gov/newsroom/article/0,,id=200293,00.html
The Internal Revenue Code establishes that any officer of a corporation, including S corporations, is an employee of the corporation for federal employment tax purposes. S corporations should not attempt to avoid paying employment taxes by having their officers treat their compensation as cash distributions, payments of personal expenses, and/or loans rather than as wages.

JACUSTOMER-js70kika- :

So being an employee of an employment agency is the best way to go?

JACUSTOMER-js70kika- :

Also should I be adding on a % to my bills to pay federal taxes

LEV :

Your federal income taxes are based on your total income. You may have 15% as a raw estimate.

LEV :

There will be FICA taxes - total 13.3% on your wages - part is paid by S-corporation and another part is withheld from employee's paychecks.

JACUSTOMER-js70kika- :

What is FICA taxes

LEV :

FICA stands for Federal Insurance Contributions Act - includes Social Security and Medicare taxes.

LEV :

Medicare 1.45% and Social Security 6.2% - each employer pays in to the IRS.
Same amounts are paid by each employee. However employee's portion of Social Security is set to 4.2% in 2012.

JACUSTOMER-js70kika- :

So again. I should be an employee of an employment agency. And should be adding roughly 15% to my bids to cover the feds.

LEV :

If you are an employee of your S-corporation - all payroll taxes are paid by the S-corporation. You may estimate payroll taxes as roughly 15%.
Income taxes are paid by the employee - so that is not a concern of the S-corporation.