Need Help With Question about Taxes...

[chickadee]

Okay. So I just started a new internship. The job pays a lousy $11/hr. Today was my first day and my boss sprung something on me that I don't quite follow.

I've only had two jobs previous to this one. I worked at one place that I just got paid cash every week. My other one I started in January at Morgan Stanley so I haven't had to worry about taxes ever just yet. At Morgan Stanley I make $8/hr, but they just take taxes out (about 20%) from every paycheck. All seemed well.

Apparently at this new job, my boss will be giving me a check every week. The taxes will not be coming out of my paycheck each week. I thought awesome, no taxes.... but no. While my boss is not filing taxes for me now, he will be at the end of the year stating he paid me.

What does this mean for me in the future? Will I owe a hell of a lot of money when tax time comes? If so, how do I figure out how much? How exactly would I file for all of this?

.... and I call myself a finance student

Any help would be appreciate. Im a complete newb to taxes, so I'll try my best to answer any questions if elaboration is needed. I've wait almost a month and a half to start this job. Now im just confused beyond belief and wondering if its worth it?

EDIT: i should clarify. i know i could just take similar tax rates of what i pay at morgan stanley to figure out what i could owe with my new job. my question is is that because my employer isn't paying any taxes for me, how much does the amount i have to pay increase by? do i have to cover what my employer now wouldn't be paying for me?

 

[bctbct]

Sounds like he is going to call you an independent contractor and let you pay all the tax. Bad deal for you.

 

[mugs]

1099? How did you find a job that pays only $8 an hour at Morgan Stanley?

If you're a 1099 employee, you'll pay what you'd normally pay in income taxes plus the employer's share of social security (something like 7%). What sucks is that your position probably isn't one that can be considered an independent contractor, but what are you going to do about it? Complain and get fired?

Set aside a portion of each paycheck to pay for your possible income tax bill next year.

 

[chickadee]

Originally posted by: mugs


Set aside a portion of each paycheck to pay for your possible income tax bill next year.

any idea how to figure what percentage that would be? :/

i just started this job, and i waited awhile to get it. i'd hate to just up and leave and say i can't do it after all i went thru to get it. but i have very good grades and can easily find myself another internship at the same time that might not come with the same problems. then again maybe it isn't a big problem? i dont know. when he shortly explained it it didnt seem so bad, but when i came home and said it to my mom, she wasn't pleased at all.


as for how i got $8/hr at morgan stanley, thats apparently what they get away with paying an intern? i dunno. maybe ive been getting screwed by them. I know I've been getting paid 8/hr, and after taxes it has worked out to about $6.66 an hour. (33hrs = $220). So I don't know if i should use that math in figuring what to deduct. Or will I be paying double taxes since my employer isnt paying? (as i am taking it from what ive read by googling...)

 

[bctbct]

OP when you file a 1099 you also have to pay a little over 7% more toward social security since your employer does not match SS funds with this arangement. So right off the top you pay like 15.3 % SS plus income taxes.

 

[mugs]

Save a bit higher percentage than they were taking out of your check at Morgan Stanley. Better to get a some back than to be hit with a bill for taxes you can't pay. 30% seems high for $8 an hour, even with all taxes combined. You'll probably get some back at the end of the year.

 

[Ameesh]

Originally posted by: chickadee

Originally posted by: mugs


Set aside a portion of each paycheck to pay for your possible income tax bill next year.

any idea how to figure what percentage that would be? :/

i just started this job, and i waited awhile to get it. i'd hate to just up and leave and say i can't do it after all i went thru to get it. but i have very good grades and can easily find myself another internship at the same time that might not come with the same problems. then again maybe it isn't a big problem? i dont know. when he shortly explained it it didnt seem so bad, but when i came home and said it to my mom, she wasn't pleased at all.


as for how i got $8/hr at morgan stanley, thats apparently what they get away with paying an intern? i dunno. maybe ive been getting screwed by them. I know I've been getting paid 8/hr, and after taxes it has worked out to about $6.66 an hour. (33hrs = $220). So I don't know if i should use that math in figuring what to deduct. Or will I be paying double taxes since my employer isnt paying? (as i am taking it from what ive read by googling...)

So I don't know if i should use that math in figuring what to deduct.

goddamn i fvcking hate you, its not like you are solving some diffieq using a power series, you just divide the two numbers and you get the percentage of the salary you should be able to use and the percentage you should save.

1 - 666/800 = 16.75% , if you want to be safe, save 20% but at the wages you are making (which you obviously deserve) you can probably a return and get it all back.

idiot!

 

[chickadee]

i recalculted. its about 20% not 30%, sorry.

My pay should be: 33hrs = $264. but after taxes is 222.03

YTD from January to now I've only made about $2000 working there.

So I would hope to get some sort of taxes back on that, but I don't know. Would it be enough to offset well enuff what I'm making now? I planned on leaving morgan stanley now that i had a new job and i have school starting back up soon, but im not so sure thats a good idea anymore if continuing to work there would help defray taxes... [tho after tolls + gas.. im making next to nothing in the end working there..]

 

[tfinch2]

http://www.lzpcpa.com/calctax.html

Click on Self Employment Taxes

 

[chickadee]

im suddenly an idiot cause ive never done taxes before and im trying to understand them?

im well aware how to take 20% off of what im making now. however if you actually paid attention to what i was asking instead of just being an ass im not paying the same tax bracket id be paying at morgan stanley because i have to now cover what my employer isn't paying as well.- from what i can see from googling, id owe ADDITIONAL money on top of that 16% i pay now since my employer wont be matching my taxes. im trying to figure out that would end up being then since im paying taxes as an "independent contractor."

i should also acknowledge the idiot and i deserve what im getting paid comment. im far from an idiot. i do extremely well in school. you know how hard it is to find a paid internship in the business field/financial industry in the NYC area? theres so much competition and so many lil' rich kids living off their parents money that they can take internships unpaid. in fact there were kids parents who were paying companies to take their kids in as interns. so finding a paying internship in this area willing to work around my schedule while still attending school is an extremely lucky thing. I could take a job doing stupid work and get paid $15/hr to sit behind a desk and answer phones. but thats not what i want to do. i want to work in an environment thats going to educate me now instead of getting pushed out of college and having no idea what the ****** to do in my job cause while a college education is great - it doesn't come close to preparing you for what the work environment is like. Plus I think being able to put down morgan stanley and lincoln financial as my internships as opposed to saying i worked at McDonalds will help me get an amazing job out of college while you go on to continuing your exhilarating life of hundreds of thousands of AT posts.

Originally posted by: Ameesh
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[chickadee]

i should also just mention - i found a few websites that said how to calculate what you would owe as an indepedent contactor. my problem is is they all require you to input what you made in 2005 as a stepping stone ... i never filed taxes in 2005 or made money that went on record, so none of those calculators seems to be working out right for me.

 

[Mermaidman]

I believe you have to make quarterly payments to the IRS and state for the 1099 income.

Paging Eaglekeeper and CPA!

 

[tfinch2]

edit

 

[mugs]

Seriously, you're in college? Shens.

 

[KarenMarie]

if he doesnt take it per pay period and doesnt take it quarterly, then you will have to file as self employeed and get hit with HUGE taxes when you file, unless you come up with deductables.

if the quarter is already past, you are pretty much SOL, as the fines for not paying on time will get ya.

that's how it works in NJ, anyway.

 

[chickadee]

Originally posted by: mugs
Seriously, you're in college? Shens.

no shens. going into my fourth yr working towards a BS/MBA in management with concentrations in marketing and ive added in finance ... and if i feel adventerous and pick up two extra classes before i graduate i can minor in management information systems.

 

[tfinch2]

Originally posted by: KarenMarie
if he doesnt take it per pay period and doesnt take it quarterly, then you will have to file as self employeed and get hit with HUGE taxes when you file, unless you come up with deductables.

if the quarter is already past, you are pretty much SOL, as the fines for not paying on time will get ya.

that's how it works in NJ, anyway.

Is that for the state return in NJ?

 

[chickadee]

Originally posted by: KarenMarie
if he doesnt take it per pay period and doesnt take it quarterly, then you will have to file as self employeed and get hit with HUGE taxes when you file, unless you come up with deductables.

if the quarter is already past, you are pretty much SOL, as the fines for not paying on time will get ya.

that's how it works in NJ, anyway.

NJ is where I am from!

 

[mugs]

Originally posted by: chickadee

Originally posted by: KarenMarie
if he doesnt take it per pay period and doesnt take it quarterly, then you will have to file as self employeed and get hit with HUGE taxes when you file, unless you come up with deductables.

if the quarter is already past, you are pretty much SOL, as the fines for not paying on time will get ya.

that's how it works in NJ, anyway.

NJ is where I am from!

I *think* the underpayment penalties only apply if you do it two years in a row, but I'm not an accountant so don't quote me on that.

 

[KarenMarie]

Originally posted by: tfinch2

Originally posted by: KarenMarie
if he doesnt take it per pay period and doesnt take it quarterly, then you will have to file as self employeed and get hit with HUGE taxes when you file, unless you come up with deductables.

if the quarter is already past, you are pretty much SOL, as the fines for not paying on time will get ya.

that's how it works in NJ, anyway.

Is that for the state return in NJ?

I worked for my father. We decided what I would be paid on paper.

He just cut me a check every month and i did not worry about it. It was a pretty small amount, so i figured that with a kid, being a single mom, i would not get hit too bad.

when tax time came, i had to file independent. I got hit with a $2,500 self employment tax right off the bat. I freaked. So, I called the accountant and he said that because i did not get taxes taken out, i was self employed. I asked what i could do. he said that if he would have known earlier, he would have paid them quarterly for me. But if i tried to go back and pay them at that point... the penalties, with interest, would make up more than the $2,500 they wanted.

so i had to find every possible deduction i possibly could to get the number down and with filing as head of household and single mom, i practically broke even.

 

[tfinch2]

Originally posted by: KarenMarie

Originally posted by: tfinch2

Originally posted by: KarenMarie
if he doesnt take it per pay period and doesnt take it quarterly, then you will have to file as self employeed and get hit with HUGE taxes when you file, unless you come up with deductables.

if the quarter is already past, you are pretty much SOL, as the fines for not paying on time will get ya.

that's how it works in NJ, anyway.

Is that for the state return in NJ?

I worked for my father. We decided what I would be paid on paper.

He just cut me a check every month and i did not worry about it. It was a pretty small amount, so i figured that with a kid, being a single mom, i would not get hit too bad.

when tax time came, i had to file independent. I got hit with a $2,500 self employment tax right off the bat. I freaked. So, I called the accountant and he said that because i did not get taxes taken out, i was self employed. I asked what i could do. he said that if he would have known earlier, he would have paid them quarterly for me. But if i tried to go back and pay them at that point... the penalties, with interest, would make up more than the $2,500 they wanted.

so i had to find every possible deduction i possibly could to get the number down and with filing as head of household and single mom, i practically broke even.

Okay, but that didn't answer my question.

 

[KarenMarie]

Originally posted by: mugs

Originally posted by: chickadee

Originally posted by: KarenMarie
if he doesnt take it per pay period and doesnt take it quarterly, then you will have to file as self employeed and get hit with HUGE taxes when you file, unless you come up with deductables.

if the quarter is already past, you are pretty much SOL, as the fines for not paying on time will get ya.

that's how it works in NJ, anyway.

NJ is where I am from!

I *think* the underpayment penalties only apply if you do it two years in a row, but I'm not an accountant so don't quote me on that.

Unfortunately, that is incorrect. I need to pay the b/f's 927 and 941 by the 15th of each month. if i am a day late the penalties total almost $90. plus interest. i have never been more than a day late... so i don't know if that is weekly or monthly.

and as for the payroll... i asked that the b/f put me on the payroll. i have been doing his books for almost 7yrs, without pay and it was not the money, but a good way to get a little out of the biz account to help out with the household bills. the accountant asked me if i wanted to go the same as when i was working for my dad. i said NO... pay the taxes. I pay them quarterly for both the b/f and myself. and i was told that if the payment was late... there would be penalties with interest.

edit: sorry tfinch2... it was federal, i think. i used TAXcut and i only got as far as Federal before freaking and finding deducations.

 

[tfinch2]

Also, how much income are we talking here? Are you going to be working full-time for the rest of the year?

Read this:

http://ct.monster.com/articles/freeagenttaxes/

and this:

http://www.irs.gov/pub/irs-pdf/p505.pdf

 

[mugs]

Originally posted by: KarenMarie

Originally posted by: mugs

Originally posted by: chickadee

Originally posted by: KarenMarie
if he doesnt take it per pay period and doesnt take it quarterly, then you will have to file as self employeed and get hit with HUGE taxes when you file, unless you come up with deductables.

if the quarter is already past, you are pretty much SOL, as the fines for not paying on time will get ya.

that's how it works in NJ, anyway.

NJ is where I am from!

I *think* the underpayment penalties only apply if you do it two years in a row, but I'm not an accountant so don't quote me on that.

Unfortunately, that is incorrect.

Are you sure?

http://ncnc.essortment.com/taxespenalties_rlcx.htm

If you owe $1,000 or more in addition to the taxes you already paid the IRS during the year, you may or may not owe a penalty. To determine if you owe a penalty, you will need last year?s tax return. Look at the amount of federal income tax you already paid in for this year and compare it to your total federal income tax bill last year. If you paid in at least as much as you owed last year, you are okay. If not, you still may be okay if you paid in at least 90% of your total tax liability for this year (Note: This rule is different for high-income taxpayers. The definition of ?high income? changes each year, so if you have income around $150,000 or more - $75,000 if married filing separately - consult your tax advisor).

 

[chickadee]

Originally posted by: tfinch2
Also, how much income are we talking here? Are you going to be working full-time for the rest of the year?

Read this:

http://ct.monster.com/articles/freeagenttaxes/

and this:

http://www.irs.gov/pub/irs-pdf/p505.pdf

i read that first one in my search but didnt find it too helpful.

not full time. maybe at most 15-20 hrs per week. so one the high end, about 5500 between now and the end of the year. + by the end of the year maybe 4k from morgan stanley. so 10k for hte yr total.

edit: i read the second one too ;/ but it wants you to compare against last years income. and i dont have that.