If I own a small business and have 1099 employees, will I be taxed on the money I pay them?

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If I own a small business and have 1099 employees, will I be taxed on the money I pay them?

Asked on October 20, 2015 under Employment Labor Law, Texas

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

If they are truly 1099 independent contractors--not employees employees do not receive 1099s--then no, you are not taxed on the amounts you pay them. If they are--or should be, under the rules--classiied as employees, however, then you would have to pay the employer portion of social security and medicare.
To see if your worker are truly indepenent contractors or if instead, they must legally be treated as, paid as, and taxed as employees, you can go to either the IRS or U.S. Department of Labor websites and search for "independent contractors" to find the tests or criteria to be independent contractors. If your workers don't meet those tests, they are employees and must be paid on W-2s, not 1099s.


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