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Outsourcing Question...

C

cpals

Diamond Member
Okay, here's the setup: A friend of mine has a small little computer business that he works on people's computers and stuff and companies. Well, one of the companies asked him to build him a website and so my friend asked if I could do it for him since he was low on time. I made the site and gave it to him and should be getting payed soon.

However, my friend is saying I need to pay taxes to him for doing this project for him... or something like that. Does this sound reasonable? I've never done a website for money before and I'm not accusom to any of the things that go with it like taxes and such.

Any help appreciated.
 
If your state collects sales taxes then maybe, but not sure since as a subcontractor you might need to pay them directly to the state yourself instead.

Income taxes: no. Your friend needs to collect your SSN and send a form 1099 to you and the IRS if over ?$900? (download it yourself from irs.gov). But contractors don't generally collect taxes from subcontractors on behalf of the IRS.

If your friend is now counting you as a part-time employee rather than a self-employed contractor (though making you an employee seems silly for one job) then he'd collect payroll taxes and give you a W-2 at the end of the year.
 
Yep its reasonable. I was an independent contractor for a web development company. The company will pay you but not take any takes out. So you will have to claim and pay taxes yourself.

Pretty much its just so small company do not have to worry about paying taxes for their employees.
 
Originally posted by: krwell
Yep its reasonable. I was an independent contractor for a web development company. The company will pay you but not take any takes out. So you will have to claim and pay taxes yourself.

Pretty much its just so small company do not have to worry about paying taxes for their employees.
Click to expand...
Exactly, it's unusual for a contractor to be trying to collect taxes from a subcontractor.
 
Originally posted by: krwell
Yep its reasonable. I was an independent contractor for a web development company. The company will pay you but not take any takes out. So you will have to claim and pay taxes yourself.

Pretty much its just so small company do not have to worry about paying taxes for their employees.
Click to expand...

You seem to contradict yourself... you say "Its reasonable" and then later you say "So you will have to claim and pay taxes yourself."

If the first part was right, then I would have to pay him the taxes. If the second part was right, then I would not pay him taxes, only on my income tax return.

Also, I live in Florida if that helps.
 
It's a 1099-misc. Pretty common stuff for independent contractor. You should be able to offset it with deductions to not have to worry about paying on it.
 
Originally posted by: cpals
But am I supposed to be paying my friend directly?
Click to expand...

No. You'll be required to pay 14.5%(I think that's the number) + your current tax bracket's worth of salary into social security, state, and federal taxes. So, count on your overal tax rate being somewhere between 15% and 45% on that depending on your current tax rate.

BTW - did they ever collect your social security number off you?
 
No, he was just a friend I was helping out. I think I'll get paid like $400 or something.

Also, I'm 21 years old and make around $12,000/year at my part time job.
 
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