For those of you fortunate enough to be able to employ a helper-- how do you pay them? I have the possibility of taking a job at a higher- end bakery job-- Can hardly believe it! But, the offer is for less money, but to be paid in cash I just don't know enough about business to know how or why this would be the way to go. Can anyone shed some light on it for me? I have to call them back tomorrow to discuss our options!
Sounds like they are wanting to pay you under the table so they don't have to worry about the taxes. As far as Uncle Sam is concerned, you would look unemployed. I'm pretty sure that it's illegal to be paid under the table, unless you'll be considered a contractor, and they give you a W something or other at tax time. You will want to have them clarify if they're wanting to pay you "under the table", or if you'll be considered self employed and a contractor.
I pay my assistant with a payroll check every week. And I file state and federal reports every quarter to the IRS. Totally legal, the only way to go.
If you're paid in cash as a contractor, you would want to look for a 1099-MISC, assuming you make more than like $600 (that's the form on which wages are reported for people who aren't considered employees).
Yes, legal is the only way to go. However, if you tell your assistant when to come to work, when to leave, and direct his/her actions (I'm paraphrasing), they are an employee. It depends on the description whether or not the assistant is an employee or independent contractor.
If you are paid "in cash" your employer would most likely give you a 1099-MISC to report what they have paid you. (they would want to take the expense against their income). When you receive a 1099MISC, you are self employed in the eyes of the IRS and must report this income on a Schedule C for self employment. You will be responsible for all the social security and medicare taxes (as opposed to being an employee and the employer paying half of them). This amounts currently to 15.3% of roughly 97% of earnings less your expenses. So in dollars and cents, you will pay 15.3% PLUS whatever regular income tax bracket you are in on this money. If you do this, be very diligent about keeping your expenses to offset earnings. BTW, even if you don't receive a 1099, you are supposed to report ALL income on your tax return - even if less than $600. Self employment income can be very expensive income if you don't keep records.
Chances are if they're offering less money its "off the books". In my experience an independent contractor, generally, doesn't get paid less because they are still paying taxes, its just that the employer is not withholding the taxes. Getting paid under the table is completely illegal, for both the employer and the employee. The reason some people choose to do it is to avoid taxes, not have a record of their income (ie. pending divorce) or they do not have the proper paperwork to be employed in the country. The employer also gets to avoid paying taxes, workmens comp., and insurance. If you ask me its trouble in the end for everyone involved.
There are very definite rules and guidelines on what is considered an independent contractor. You can't just call someone that.
When we started using people on weddings, we asked our accountant about that specifically because we only use them sporadically, depending on the catering schedule and the number of staffers needed. It was a big no, no, no, no. They are employees. They do not qualify as independent contractors.
IMO, if they said "cash", they are not interested in keeping paperwork. They are in trouble for taxes and you are in trouble for unreported income.
Thank you, everyone!!! I felt deep down that this was trouble-- I really want the opportunity, but I'm financially strapped as it is-- I would not be able to handle being an 'independant contractor' and dealing with a 1099W or whatever is just asking for trouble on my part.
Thank you thank you thank you
If they report the income they pay to you at tax time you will get a 1099 and have to pay taxes on that amount. If they don't it is illegal.
Would you get caught probably not, but you could run into a whole lot of trouble when trying to finance a car or house or take out a loan because you will have no proof of income.
Ok-- so I've given it some thought and I talked to the owner and a bazillion other people as well. For now, I am going to work PT-- one- two times a week as needed. I have a FT job that I am beginning to despise, BUT it offers incredible benefits. So I can't leave that for something so unstable. I told her in no uncertain terms that I can't deal with 1099s and independant contractor crap. I did that before and it bit me in the butt!
You can make up to $500 a year and not have to report it, so I have been told. So when I get close to my $500. we are going to re-evaluate the situation. It gives us a chance to work together and see how it goes. If it's too far for me to travel or we can't get along or the work isn't for me, whatever, we both have an out at that point. WIsh me luck!