Hello, I am a photographer working for a company. In order for them to save money, they're hiring me as a "subcontract". That means, I'll have to pay taxes and they won't have anything to do with it. My boss told me it was about 25% of my monthly income which is $250. Does this mean at the end of the year, I'll have to pay $3,000 dollars in taxes? I only make $12k a year. I am currently looking for an apartment and I don't think I'll be able to save that extra $250 to put towards taxes. I don't want to mess things up!
I just want to know if this process is completely legal, I feel I'm not making enough money considering my skill set.
1 Answer from Attorneys
There are specific rules used by the IRS to determine if you really are an independent contractor. If you do not meet these rules you could be reclassified as an employee. In either case you are responsible for timely paying your income taxes and your share (whatever that may be) of the employment taxes.
If you are an independent contractor you need to file and pay your self-employment and estimated income taxes each quarter. (The government does not want to wait until the beginning of next year to get their payment). If you don't, you could be subject to penalties for the failure to remit the proper amount each quarter.
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