I am looking at a potential employer that wants to pay me with no taxes witheld and issue me a 1099 at the end of the year. Is this a good idea ?
He owns fewer than 10 trucks and is leased onto another company for their operating authority. He wants to start me out at .32 cpm with a small bump after 90 days. I'm a little leery of this as I have ALWAYS had my employer withold taxes for me. Is it legal? Should I be concerned? HELP! Need you'll's advice. thx
form 1099??? good or bad???
Page 1 of 3
I was 1099 for years before I got into trucking. I was in sales, and 1099 is pretty common. I never had any trouble or got ripped off. I had no problem getting good affordable insurance, infact, I kept it and passed on the company insurance. I had a good accountant and took advatage of many tax breaks. It cost me less to pay my own taxes, workers comp and all.
Instead of the company taking the money out, I took it out weekly and deposited it in an interest earning account. I paid my taxes quarterly, with the exception of one year I let the money ride all year in the account and paid at the end of the year.
A lot of industries use 1099, I am not surprized to find it in the trucking industry, especially with all the O/O, L/O and fleet operators.
I have worked with 1099's for years. Not a problem for me. Trick is to save $ out of each check. The first year I simply held 15% of each check, put it in a account and NEVER touched it. Filed my taxes at the end of the year, paid what I owed, from then on paid quarterly. I personally never had a problem and don't mind having a 1099 at all. Never got ripped off and I usually had $ left in the tax account at the end of the year. After the first year a good accountant will help you and tell you exactly what your tax liability is. It's probably not for everybody but I sure wouldn't pass on a job because of it.
oh my! now I am really confused! Besides keeping 100% of my pay, are there any advantages to this pay method?
If I were to make an average of $750 a week, how much should I put aside for taxes?
Am I still required to pay Fica?
What did you mean "both halves of the taxes"?
You are considered as non employee and would have to file a Schedule C. The net profit from the schedule C is subject to Self Employment tax which is 15.3 %. Your net profit is also subject to federal and state income taxes. You would not have any withholding since you are not an employee.
This is done as a way that the employer can avoid the cost of the employer's share of the fica. It also removes them from providing workmens comp insurance in the case you are injured on the job.Last edited: Dec 8, 2009
...and others here...UNLESS the owner is willing to compensate you at a higher cpm rate that would make sense for you. That way you can use the excess earnings to make up for the other items that have been mentioned.
I am a CPA and have seen this scenario hundreds of times over the past 15 years.
Truckerdave, from what you have posted, $0.32/mile doesn't seem to be anywhere near a good enough number to make up for what you lose in the deal.
It is nice while you are getting paid because you get 100% of every dollar you earn.
However, it is a financial train wreck for those who are not financially astute and disciplined enough to make sufficient quarterly estimated tax payments and prepare for April each year. What I have seen happen with those who are "Independent Contractors" is that they spend 100% of the income and are met with a minimum 25% tax bill at April 15th (10% regular income tax rate plus 15.3% self-employment rate.) Now, granted you would be able to deduct the expenses to which you are entitled from the gross, however, and hopefully, that will still leave a positive net income number at the end of the year.
My guess is that your prospective "employer" is simply trying to save himself money and the administrative compliance by not showing you as an employee. When he does this, he doesn't have to withhold taxes, he doesn't have to pay state or federal unemployment tax or provide workers comp insurance nor does he have to comply with his state's employment reporting requirements.
If you lose your "job", you would not be able to file for unemployment because you would be considered self-employed and you wouldn't qualify for the benefits.
So, in your case, heed the counsel given here, especially that of jtrnr, and RUN AWAY.
Page 1 of 3
Trucking Jobs Available: Now HiringFree Class A CDL Training with a CRST Career - CRST Expedited
Tuition Reimbursement for Recent Class A CDL Graduates - CRST Expedited
Class A CDL Experienced Drivers Earn More! - CRST Expedited