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If you are business and you use 1099's to pay taxes can a company tell you that they have to deduct taxes from your payment?

Severn, MD |

I am a free-lance make-up artist in the Washington DC and surrounding areas. I worked for a company and I was told by them after the fact that I could not invoice and I had to submit their timesheet as an employee and have payroll taxes deducted. They said they had been audited by the IRS and they were told by the IRS that they are held responsible for persons they hire when those persons are not an INC or LLC. When I file my taxes I use 1099's for documentation so I don't understand how they are responsible for my taxes. The problem for me is that as a make-up artist there are certain write offs that I need to make in order to function as a free lancer and I won't be able to do that if I am receiving a W-2 as if I am an employee. I need to know what my rights are and if I need to become an LLC to continue doing business as I have been?

Attorney Answers 3


  1. The company does not need to issue W-2s to everyone not organized as an LLC or incorporated. You are not required to form an LLC to do business as a consultant (although it is recommended). You can be designated as a sole proprietor. However, if the company insists you were an employee, you should have completed a Form W-4. Since you have out-of-pocket expenses that your "employer" did not reimburse you for, submit an expense report for those items. If they refuse, you can still claim those expenses. I recommend you speak with your accountant on claiming any expenses on your taxes. So, in a nutshell, you do not need to become an LLC to continue doing business; however, I urge you to spend a little money now talking to an attorney about what all is involved in your business and what assets you may have which may need to be protected. You may be safer forming an LLC.


  2. It is evident that your employer is trying to avoid any further problems. However, you should be aware of different factors regarding whether or not you are an independent contractor to that specific employer. The main issue is whether your employer has control over your work done or the manner in which you do your work. Additional factors that make you an independent contractor are:

    1. you work with a number of clients.
    2. you work on projects with scheduled deadlines and are paid by the job, not hourly or salary based.
    3. you are responsible for your own benefits, including health, workers comp and disability insurance.
    4. you advertise your own business.
    5. you supply your own tools

    These are several arguments you can take to your employer.


  3. It is evident that your employer is trying to avoid any further problems. However, you should be aware of different factors regarding whether or not you are an independent contractor to that specific employer. The main issue is whether your employer has control over your work done or the manner in which you do your work. Additional factors that make you an independent contractor are:

    1. you work with a number of clients.
    2. you work on projects with scheduled deadlines and are paid by the job, not hourly or salary based.
    3. you are responsible for your own benefits, including health, workers comp and disability insurance.
    4. you advertise your own business.
    5. you supply your own tools

    These are several arguments you can take to your employer.

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