IRS 1099 EMPLOYEE
Mike Block is a Fort Lauderdale CPA with extensive experience in this area. He says no one should use words like 1099 employee, salary, wage or payroll, without withholding tax. Block says, there is absolutely NO such thing as a 1099 employee. Accountants and examiners expect improper Independent contractor treatment when they hear (IRS) 1099 employee or see (IRS) 1099 employee. Employees have taxes withheld and get W2 forms. Independent contractors have no tax withheld and may not need an IRS 1099 form.
INDEPENDENT CONTRACTOR AGREEMENT:
Most Independent Contractor Agreements are worthless for an IRS 1099 employee or independent contractor. Tax and insurance examiners ignore Independent Contractor Agreements unless they confirm that relationships meet many federal and state tests for independent contractors. Companies cannot use Independent Contractor Agreements that ignore where, when and how jobs are done; pay rates, length of service; business expenses; facility and tool investment; printing business cards; service to others; benefits; and much more.
Block never saw one-paragraph Independent Contractor Agreements accepted in tax or insurance exams. He spent years gradually creating his own two-page Independent Contractor Agreement for free download. He kept adding all he heard about Independent Contractor Agreements and had many attorneys review his, while often successfully using his Independent Contractor Agreement in IRS 1099 employee and insurance exams . A typical reaction involved an examiner saying, "We do not pay any attention to Independent Contractor Agreements" and later asking for a copy. Readers can now click on http://1234567890.typepad.com/
INCORPORATE (or LLC)
Block helps guarantee independent contractor agreement status by having clients give an independent contractor his own corporation (or LLC). A Tax Court case confirms this even for obvious employees, like members of the NY Ranger hockey team. It often makes IRS 1099 forms unnecessary. Corporate tax deductions are often far bigger. Salary or commission can be the exact amount needed for maximum tax credits or minimum or maximum social security or Medicare coverage. Block expects $5,000 minimum savings for $250 initially and around $500 annually.
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