Another tax type question

[Justanopinion]

I have a friend that worked for a day care. She started full time and was then moved to part time. She worked full time for a few months over the summer and then when school started is when they moved her to part time. Then right before Christmas they let her go.

In October she realized they had not been withholding taxes. She questioned it at the time and was told that she was a contract employee and that she would get a 1099.

When she filed her taxes she ended up losing some of her return due to having to pay self employment taxes.

Can the day care legally do that? Don't they have to withhold taxes and what not?

BTW...there are 3 other employees that did not realize that taxes were not being withheld. My question was don't any of you look at your pay stub? I guess not.

 

[JimmyPicker]

If she was a temporary employee, and they didn't withhold taxes, she gets a 1099.

She didn't pay taxes on the money she earned while she was earning it, so she has to pay it at tax time.

I don't know if the company can do this legally or not, it all depends on the contract and papers signed by your friend when she started the job.

Did your friend fill out tax papers when she started? Like an I-9 or a W-4 or a state withholding form? If she didn't fill any of those withholding forms out she had to know they weren't withholding taxes.

Your friend needs to look at any contracts she may have signed with the company. We're not going to have the answers, but she may have the answers when she digs a little deeper.

 

[JimmyPicker]

When she filed her taxes she ended up losing some of her return due to having to pay self employment taxes.

Also, I wanted to point out that she's not "losing" some of her return due to paying self employment taxes.

Self employment taxes are basically taxes that would be deducted from your paycheck to go towards social security and medicare, so she would have been paying them anyway if she were a regular employee.

The only difference with that is, under normal circumstances, the employer matches your SS and medicare contributions.

But, you can also deduct half of your self employment tax from your gross annual income. I guess that's to make up for the lack of employer contributions.

 

[JimmyPicker]

Hi, it's me again. If your friend digs a little deeper and thinks she has been wrongfully classified as an independant contractor, she can file a form with the IRS, it's something about Uncollected SS tax on wages, or something like that.