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1099 Employee

post #1 of 16
Thread Starter 
Has any professional cake shop owner or bakery owner ever paid there employees as 1099 employees? I started working for this bakery about a month (I posted a topic about it) but now the employer wants me to pay me as a 1099, which works in her benefit not mine. Before I started there they essentially did none of there own baking. They purchased wholesale from another bakery. Our agreement from the beginning was that I would be hired as there employee and supply them with cupcakes, large decorated cookies and also be there only cake decorator. Now I'm not sure how to move forward with this business deal? I was thinking of using this to my advantage and work as an actual consultant. I can use my own supplies book my own clients etc.... Any advice?
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post #2 of 16
Could be a sticky situation for you and them. If they present themselves as a bakery and you do your baking there, you are an employee. The 1099 might not fly.

The 1099 as I understand it, applies to outside contractors or short-term projects on site. if you baked on site for three weeks before Christmas, you could be 1099. If you came in a few times a year for a wedding cake that they didn't want to do, you could be 1099.

If you bake elsewhere and bring to them, then 1099 it and set up your own wholesale business to this bakery. Make sure you are making a profit and not subsidizing their business.

Sounds like you are an employee. Talk to a tax person before you do this.
post #3 of 16
You will be responsible for all of your taxes if you are 1099ed. My husband works in another industry and gets 5-6 1099 forms from different manufacturers every year which he then has to pay taxes on. On the plus side, he can deduct any expenses he incurred while working. I have 2 halls that I provide the cakes for their wedding packages, one of them sends me a 1099 every year. It has my name on it with no SS#. My accountant rolls his eyes every year when I hand it to him, like he says I am providing a wholesale product to them and it should be written off on their end as such (he always says do they 1099 Sysco for delivering their food???)
post #4 of 16
My accountant rolls his eyes every year when I hand it to him, like he says I am providing a wholesale product to them and it should be written off on their end as such (he always says do they 1099 Sysco for delivering their food???)

The answer to this answer could very well be yes. Some businesses will use the 1099 form for a supplier like Sysco because of the large expense and because it is another way of reporting a payment/expense to the IRS. Also, if the company pays you over $600 they are REQUIRED to send you a 1099
post #5 of 16
Quote:
Originally Posted by Jenise

My accountant rolls his eyes every year when I hand it to him, like he says I am providing a wholesale product to them and it should be written off on their end as such (he always says do they 1099 Sysco for delivering their food???)

The answer to this answer could very well be yes. Some businesses will use the 1099 form for a supplier like Sysco because of the large expense and because it is another way of reporting a payment/expense to the IRS. Also, if the company pays you over $600 they are REQUIRED to send you a 1099



To clarify 1099 regs, a 1099 must be provided to any vendor you do over $600 of business in the year UNLESS the vendor is incorporated. I'm sure Sysco is incorporated and as such does not regularly receive 1099s from its customers. However, that does not mean that they are not required to report the income on their taxes - they are. Just as, technically, one is required to report income of uder $600 even if no 1099 is supplied.

To the OP, there are strict IRS rules regarding the differentiation between a w-2 employee and a 1099 contractor. Certain criteria must be met in order to qualify as 1099, and it does not sound like your situation fits those criteria. Google "IRS 1099 criteria" and show it to your boss.
post #6 of 16
You will also need your own business license to be paid as a 1099 employee and IDK where the health department stands with that. Very sticky situation and it sounds like you are definitely a regular employee and they are just trying to avoid paying taxes on you. They should have discussed wanting to do anything out of the ordinary with you when you started, not after a month. How did they handle your first paycheck?
post #7 of 16
How much do you know about taxes?

With a 1099 YOU have to fill a Schedule C and pay 15% self employment tax, rather than the bakery paying 8% social security tax FOR you (with 8% deducted from your pay).

BE CAREFUL! You may be in store for a big tax bill....
post #8 of 16
1099's are not temporary.

I have successfully used 1099's with employees and had W-2 employees. Both work well and can be beneficial. I have also been the recipient of many 1099's in my construction business.

KoryAK, I seem to be coming in right behind you tonight. Thanks for saving me the typing.

Here is the deal:

I would rather be a 1099 contractor any day if I were you. The only drawback is the extra SS%. But the benefits of calling the shots and having expense deductions can make the structure more profitable.

But... you MUST comply with each and every criteria set forth by the IRS. This means going to their site and getting your information, not here. Once you have the criteria met, then run it by your accountant.

If you are a savvy business owner, you can negotiate the extra tax and a set % to cover a WC policy for yourself. This is a negotiation. You can accept or decline the offer, but you can have input.

There is another option that involves piece work.

Any way you look at it, make sure that you know and follow the rules and make sure it is beneficial to you by negotiating. Get educated on the processes at the irs.gov site. It's in easy-to-understand form.

So the independent contractor plan is just an option, not a tool to benefit the employer. Just follow every rule, negotiate, and make the best deal.

If you have any questions that are more specific, pm me. My method has been reviewed by the IRS and passes on all points.

For taxes, just have two bank accounts. Every week, deposit the estimated tax in a savings account and deposit the rest in your personal account.

You will not be able to book clients from their business on their time. And any clients generated by them are not yours. You would need to generate clients completely separate from them, but yes, you can compete. This is one of the criteria for passing the independent contractor test.
post #9 of 16
Thread Starter 
Thank you ALL for the feedback. I've been doing some research on this and it seems I can register a business name, become licensed and purchase my own insurance. Then it will be legal for her to pay me as a 1099 employee (according to WC, IRS & dept of labor) until I do those things she cannot pay me as such. I received one check from her that had no taxes taken out and she still owes me a small fee. I had an open discussion with her about all of this and I'm waiting for her to get back to me. I basically said either you hire me on like we originally agreed or I incorporate myself into a business name and we can work out a deal and have a lawyer draw up a contract. The clients don't have to go through her I can deal with that on my own. Im allowed to advertise in the shop as long as everything has my name on it (according to the law). It would basically be like renting out her commercial kitchen for my business and also sell her my products wholesale. She's out for herself right now so I have to make really smart decisions.
Mommy1st Cake Decorator 2nd.........
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post #10 of 16
Sounds like you really have a good handle on this.

One thing that is odd, the business license. For you and anyone else in business, of course it's a must. But I have received 1099 before, and not been required to have a business license (an example is a payout from a bet and stocks, and when I used to teach as a contractor at the craft store) I wonder what the difference is?

ORIGINAL creator of Gelatin Bubbles

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ORIGINAL creator of Gelatin Bubbles

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post #11 of 16
Just make sure that you follow the rules to the letter, and that sh dos too. I know of one situation where the business was using 1099s to claim that an employee was a contractor even though she fell within the definition of an employee through the IRS rules. They were basically trying to not pay any taxes for her, but it came back to bite them in the butt when the IRS found out about it.

Your idea of getting an attorney involved if you go the 1099 route is good. Make sure they detail what the owner CAN'T make you do and also what they can. There's a line that gets crossed that makes you into an employee and not a contractor, so you should be pretty clear about where that line is.
post #12 of 16
Thread Starter 
I did get all that cleared up with the IRS 2
WC and Dept of labor and they helped make me aware of the same thing. There's a very thin line there that's exactly why I want to get a lawyer involved to write it all up. She's avoiding my phone calls at this point so not really sure what to think. I'm going to write an email to we reiterating my conversation on the phone. Just to have a paper trail because she still owes me money.
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post #13 of 16
Thread Starter 
sweet flowers....not really sure what the difference is I'm just going to do what they tell me to make sure I'm legit.
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post #14 of 16
Quote:
Originally Posted by Ashleyssweetdesigns

I did get all that cleared up with the IRS 2
WC and Dept of labor and they helped make me aware of the same thing. There's a very thin line there that's exactly why I want to get a lawyer involved to write it all up. She's avoiding my phone calls at this point so not really sure what to think. I'm going to write an email to we reiterating my conversation on the phone. Just to have a paper trail because she still owes me money.



Ahha! See, as soon as you showed that you know what you were talking about and got an attorney involved to keep things straight, she starts not answering you. I have a feeling that when most people try to use the 1099 they're trying to avoid paying taxes, or at least they think that's what's going to happen. She probably didn't think it through. I bet she wants to treat you like an employee even though she's using the 1099.
post #15 of 16
Thread Starter 
Yeah that's probably what she's thinking. She thinks Im naive to all of this. Some people...... :{
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