This is a big issue that can have a drastic impact on how you are taxed.\u00a0 If you are getting a 1099-Misc you are an independent contractor\u2014you are considered self employed the same as if you had your own business.\u00a0 You will have to file a Schedule C and pay Self-Employment taxes of 15.3% of your net income in addition to income taxes.<\/p>\n
If you really are an employee, there is no Self-Employment tax, but you will have Social Security and Medicare taxes taken out which amount to 7.65% of your gross income.\u00a0 In most cases you are better off being treated as an employee.\u00a0 Employers reduce their taxes by paying you as an independent contractor as well as avoid paying benefits such as health insurance.<\/p>\n
If you are being classified incorrectly as an independent contractor, you can correct the problem by filing a relatively new form with the IRS\u2014Form 8919, Uncollected Social Security and Medicare Taxes on Wages.\u00a0 By filing Form 8919, so you avoid paying Self-Employment taxes.\u00a0 This form can be filed when you file your individual tax return.\u00a0 In addition you will need to send in a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding separately.\u00a0 You will be required to pay your share of Social Security and Medicare taxes.<\/p>\n