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If somebody is an employee, generally he is not allowed to subcontract the job to somebody else. I am surprised that his employer allows it.
That being said, there's nothing wrong with the arrangement. He pays you as an independent contractor and you will report the income on Schedule C and deduct your expenses. But here's the catch. Your self-employment income will be subject to 15.3% self-employment tax (Social security and Medicare tax) in addition to regular income tax. You may also have to pay estimated taxes since no taxes will be withheld from your pay. You should account for about 25% of your pay for federal taxes, plus state and local taxes, if applicable.
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