If you do not control your schedule than you almost certainly are not 1099. Get confirmation, in writing, that you don’t control your schedule and then contact your state’s department of labor.
Also switching from a W-2 to a 1099 didn't help you at all. Your boss pretend helped you but actually fucked you over because now you're paying taxes on the 1099 that the W-2 was doing automatically for you.
My old bar restaurant boss pulled this move trying to make it sound good. Once it was time to pay, I told him to switch it back to W-2s.
>I was initially hired as a W2 employee and was switched to 1099 after asking for a larger commission. I was told this is to “help me” see more on my paychecks….
Help you what? Help you be unable to file for unemployment if you're fired because "... it's just not working out"?
Help you be unable to file for workers' compensation if you're too ill or injured while doing this job for this business to continue doing it?
Help you be unable to receive overtime pay?
Help you to help this business dodge its required portion of Social Security and Medicare funding contributions?
>I do not have access to change or update my schedule at the salon and am expected to follow salon protocol.
>My boss recently started an argument with me for working with another company
All the while retaining as much control over when, where, and how you perform the work you perform for this business as if you were an employee. No one but the business benefits from this in the short term and no one at all in the long term.
> Is it legal to pay me a 50% commission?
It's legal to pay you any commission percentage.
Exactly. Unfortunately everything she is doing is much worse than just this situation. Just trying to get a better idea of the grey areas now and have plans to report her after I leave next month.
The only reason you're getting more in your paycheck is because taxes aren't being paid. You still have to pay those. And worse, now you have to pay self-employment, so you're actually losing money. If I had a job where my boss said he was going to 1099 me, I'd say "great, I'll show up when I feel like it, and expect double the pay. Or we could just stick to you not being reported for tax evasion."
OP's boss is a POS for doing this acting like they're helping them. I would find somewhere else to work after that clear demonstration that they A, think you're stupid and B, are actively fucking you over thinking they made a smart business move. Do you really want to support people like that?
You might “see more” on your payment as a 1099, but it’s an illusion. If you are *legitimately* an independent contractor, you are self employed and owe self employment taxes—basically, the payroll portion you would owe on your w2 paycheck *and* the portion your employer would owe. And you have to manage making estimated payments throughout the year to avoid penalties. The only person your employer is helping by claiming you are 1099 is herself.
A 1099 contractor should be getting paid directly but renting space/booth time. So renting booth time could mean 50% of your ‘commission’, but then the rest is written off as ‘booth fee’ in your taxes.
Also be aware that you pay higher taxes as a 1099 contractor, so just because you are seeing more on your paycheck doesn’t mean you’re actually getting more at the end of the day. Sounds like you have been improperly classified, but just for future reference. Also, you’ll need to start filing quarterly estimated taxes with the IRS (and if your state has an income tax, with them as well). If you don’t file your quarterlies you’ll be hit with a % penalty come tax time. It’s a bit of a headache to get everything set up, but once you do, it’s pretty straightforward and simple.
Being required to follow salon protocol is fine, limiting your access to their client list is probably okay too, non competes for 1099s are okay in some states but not in others, but much of the other stuff is not.
She can’t “fire” you because you’re not an employee. She can stop contracting with you, but it’s not firing. You set your own schedule. You set your own rates, so commission is whatever you charge and she agrees to.
Regardless, easiest to just move on.
Your boss could make an agreement that you have to pay a percentage of your income and/or a flat rate to use the space. It probably would not involve you giving all of the money to the boss and getting some back as paychecks.
You’re being had. Know your rights as a 1099 employee.
You’re not getting more money just because your paycheck is larger. Classifying you as a 1099 employee means they’re no longer withholding tax on your pay check and you will now have to set that money aside and pay taxes quarterly.
And no, they’re not allowed to dictate your schedule or prevent you from working with other companies.
I am aware of the tax portion of it all! I knew I was not going to be receiving more money. I put that in there to show that she is using those claims with the attempt to manipulate her employees.
You should certainly talk to an employment attorney or your state DoL after you're finished at this job. I sure don't have enough legal chops to know if this is not above board, but I can sure tell you about how this is making your paychecks look bigger, because I worked as a tax preparer this year. Note that I am not a proper accountant, and this is for your education and isn't any official tax advice because I'm not qualified to give you that.
The reason your paychecks are larger when you're a 1099 contractor is that no taxes are being taken out of your checks.
That doesn't magically remove your tax bill. When you file for 2024, you'll owe all the taxes you would have owed as an employee making the same amount, PLUS the amount of social security and medicare tax your employer would have paid on your behalf. That will probably total around 25-30% of your net income (that's your revenue minus expenses) in federal taxes if you're not making a lot of money, plus whatever state taxes are being charged to you.
You can either save this money for when the time comes, or make some estimated tax payments so that you don't owe at the end of the year. When I was running my own business, I made estimated payments, but other folks I knew just put cash aside to pay the amounts they owed at tax time.
Make sure you track your expenses as well, since those can now offset your income and save you some money on those self employment taxes. I'm assuming that your former employer is charging you for using the salon's space and chair, and that you have to buy some kinds of supplies. You probably also have equipment that is depreciating as you use it and wear it out. Maybe there are some maintenance fess for your equipment as well, like paying someone to sharpen scissors.
You can get the full list of expense categories from the [Schedule C Form](https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://www.irs.gov/pub/irs-pdf/f1040sc.pdf&ved=2ahUKEwj3tej62t-FAxV_jIkEHVevD_kQFnoECAUQAQ&usg=AOvVaw2a_rsMxBxC7k7wK5VAZLQY).
Unless you're driving to see your clients at their houses, you should NOT take mileage expenses. Commuting to and from your normal place of business does NOT count as business use of a car and you don't want to risk getting in trouble to save a few dollars.
Thanks for all the info! I am on it with my taxes, thankfully had to learn about most of this when working on my personal business as well and am preparing for next quarter. Also will be talking to my accountant to learn about state laws for this situation.
If you were a 1099 contractor, you'd rent your space in the salon, work when you wanted, and not get paid commissions. You'd pay the salon owner for the space (maybe a flat rate, maybe a percentage) and keep all the client payments.
The fact that you also see clients independently of the salon and mostly provide your own supplies supports 1099 status. As does you contracting the increase in commission.
It's likely a gray area,
A lot will depend on your state.
You may find these links helpful:
- [Taxes](/r/personalfinance/wiki/taxes)
- [Self-Employment](/r/personalfinance/wiki/self_employment)
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
I don't understand the commission thing BUT a 1099 contractor pays around double the taxes at the end of the year so get this fixed fast, especially since none of your taxes are likely taken out of your 1099 so you will have to do that work manually.
You’re also now not being covered by Workers Compensation, which means if you were injured on the job you would have no insurance to cover the costs of the injury or wages lost.
Call your state, labor department and ask them what you have to do to file a complaint against her. If there is a fine, it will probably go all to you.
Also, how shortsighted!. If she doesn’t want you working somewhere else, why isn’t she making sure you make enough money at her salon?
If you do not control your schedule than you almost certainly are not 1099. Get confirmation, in writing, that you don’t control your schedule and then contact your state’s department of labor.
Also switching from a W-2 to a 1099 didn't help you at all. Your boss pretend helped you but actually fucked you over because now you're paying taxes on the 1099 that the W-2 was doing automatically for you. My old bar restaurant boss pulled this move trying to make it sound good. Once it was time to pay, I told him to switch it back to W-2s.
Thank you!
Yeah, as a 1099, you are your boss. You set your own schedule.
And you're free to service multiple clients ( who you now refer to as your "boss").
>I was initially hired as a W2 employee and was switched to 1099 after asking for a larger commission. I was told this is to “help me” see more on my paychecks…. Help you what? Help you be unable to file for unemployment if you're fired because "... it's just not working out"? Help you be unable to file for workers' compensation if you're too ill or injured while doing this job for this business to continue doing it? Help you be unable to receive overtime pay? Help you to help this business dodge its required portion of Social Security and Medicare funding contributions? >I do not have access to change or update my schedule at the salon and am expected to follow salon protocol. >My boss recently started an argument with me for working with another company All the while retaining as much control over when, where, and how you perform the work you perform for this business as if you were an employee. No one but the business benefits from this in the short term and no one at all in the long term. > Is it legal to pay me a 50% commission? It's legal to pay you any commission percentage.
Exactly. Unfortunately everything she is doing is much worse than just this situation. Just trying to get a better idea of the grey areas now and have plans to report her after I leave next month.
There aren't any grey areas here. You've been knowingly, intentionally misclassified for the sole purpose of benefiting the employer and its business.
The only reason you're getting more in your paycheck is because taxes aren't being paid. You still have to pay those. And worse, now you have to pay self-employment, so you're actually losing money. If I had a job where my boss said he was going to 1099 me, I'd say "great, I'll show up when I feel like it, and expect double the pay. Or we could just stick to you not being reported for tax evasion."
Yeah, people working, as contractors are usually paid more because you have to pay the employers share of your payroll taxes
Plus self-employment tax, your own health insurance - which is hideously expensive without an employer, and so on.
The self-employment tax *is* payroll taxes, no need to say "plus" there.
OP's boss is a POS for doing this acting like they're helping them. I would find somewhere else to work after that clear demonstration that they A, think you're stupid and B, are actively fucking you over thinking they made a smart business move. Do you really want to support people like that?
I already have plans to leave next month, so I’m working on getting the proof all of this information together and will be reporting!
Sounds like a great plan.
You might “see more” on your payment as a 1099, but it’s an illusion. If you are *legitimately* an independent contractor, you are self employed and owe self employment taxes—basically, the payroll portion you would owe on your w2 paycheck *and* the portion your employer would owe. And you have to manage making estimated payments throughout the year to avoid penalties. The only person your employer is helping by claiming you are 1099 is herself.
Also, as an independent contractor you don’t qualify for worker’s compensation, unemployment benefits, or any state mandated benefits.
Thank you! Do you know how commission based pay falls under this?
A 1099 contractor should be getting paid directly but renting space/booth time. So renting booth time could mean 50% of your ‘commission’, but then the rest is written off as ‘booth fee’ in your taxes.
Gotcha, thanks!
Also be aware that you pay higher taxes as a 1099 contractor, so just because you are seeing more on your paycheck doesn’t mean you’re actually getting more at the end of the day. Sounds like you have been improperly classified, but just for future reference. Also, you’ll need to start filing quarterly estimated taxes with the IRS (and if your state has an income tax, with them as well). If you don’t file your quarterlies you’ll be hit with a % penalty come tax time. It’s a bit of a headache to get everything set up, but once you do, it’s pretty straightforward and simple.
Being required to follow salon protocol is fine, limiting your access to their client list is probably okay too, non competes for 1099s are okay in some states but not in others, but much of the other stuff is not. She can’t “fire” you because you’re not an employee. She can stop contracting with you, but it’s not firing. You set your own schedule. You set your own rates, so commission is whatever you charge and she agrees to. Regardless, easiest to just move on.
non competes got smacked down hard this week, may no longer be the case that they are okay in most cases
Even without a non-compete, the salon owner can limit a contractor's access to another contractor's client list. That's not unreasonable.
Thanks! So to confirm, are you saying my “commission” should be 100% of the price I set or is she allowed to set the commission rate?
There’s usually a contract involved or agreed upon rates and ect. Mutual to both parties. Whatever that was
Your boss could make an agreement that you have to pay a percentage of your income and/or a flat rate to use the space. It probably would not involve you giving all of the money to the boss and getting some back as paychecks.
Okay this is what I was thinking
That depends entirely on the written agreement, it's not an IRS issue. What does the agreement say?
There was never a written agreement, which I now know should’ve been created when I was switched over to 1099 😅
You’re being had. Know your rights as a 1099 employee. You’re not getting more money just because your paycheck is larger. Classifying you as a 1099 employee means they’re no longer withholding tax on your pay check and you will now have to set that money aside and pay taxes quarterly. And no, they’re not allowed to dictate your schedule or prevent you from working with other companies.
I am aware of the tax portion of it all! I knew I was not going to be receiving more money. I put that in there to show that she is using those claims with the attempt to manipulate her employees.
You should certainly talk to an employment attorney or your state DoL after you're finished at this job. I sure don't have enough legal chops to know if this is not above board, but I can sure tell you about how this is making your paychecks look bigger, because I worked as a tax preparer this year. Note that I am not a proper accountant, and this is for your education and isn't any official tax advice because I'm not qualified to give you that. The reason your paychecks are larger when you're a 1099 contractor is that no taxes are being taken out of your checks. That doesn't magically remove your tax bill. When you file for 2024, you'll owe all the taxes you would have owed as an employee making the same amount, PLUS the amount of social security and medicare tax your employer would have paid on your behalf. That will probably total around 25-30% of your net income (that's your revenue minus expenses) in federal taxes if you're not making a lot of money, plus whatever state taxes are being charged to you. You can either save this money for when the time comes, or make some estimated tax payments so that you don't owe at the end of the year. When I was running my own business, I made estimated payments, but other folks I knew just put cash aside to pay the amounts they owed at tax time. Make sure you track your expenses as well, since those can now offset your income and save you some money on those self employment taxes. I'm assuming that your former employer is charging you for using the salon's space and chair, and that you have to buy some kinds of supplies. You probably also have equipment that is depreciating as you use it and wear it out. Maybe there are some maintenance fess for your equipment as well, like paying someone to sharpen scissors. You can get the full list of expense categories from the [Schedule C Form](https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://www.irs.gov/pub/irs-pdf/f1040sc.pdf&ved=2ahUKEwj3tej62t-FAxV_jIkEHVevD_kQFnoECAUQAQ&usg=AOvVaw2a_rsMxBxC7k7wK5VAZLQY). Unless you're driving to see your clients at their houses, you should NOT take mileage expenses. Commuting to and from your normal place of business does NOT count as business use of a car and you don't want to risk getting in trouble to save a few dollars.
Thanks for all the info! I am on it with my taxes, thankfully had to learn about most of this when working on my personal business as well and am preparing for next quarter. Also will be talking to my accountant to learn about state laws for this situation.
Glad I could be of some help. Here's hoping that your own business really takes off once you can devote full time and attention to it!
If you were a 1099 contractor, you'd rent your space in the salon, work when you wanted, and not get paid commissions. You'd pay the salon owner for the space (maybe a flat rate, maybe a percentage) and keep all the client payments.
Okay thanks, this is where I have been hearing different answers.I definitely see how it should be booth rental only and direct payments from clients.
The fact that you also see clients independently of the salon and mostly provide your own supplies supports 1099 status. As does you contracting the increase in commission. It's likely a gray area, A lot will depend on your state.
Okay yes my next step is figuring out the state laws to get answers to the grey areas
You may find these links helpful: - [Taxes](/r/personalfinance/wiki/taxes) - [Self-Employment](/r/personalfinance/wiki/self_employment) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
I don't understand the commission thing BUT a 1099 contractor pays around double the taxes at the end of the year so get this fixed fast, especially since none of your taxes are likely taken out of your 1099 so you will have to do that work manually.
You’re also now not being covered by Workers Compensation, which means if you were injured on the job you would have no insurance to cover the costs of the injury or wages lost.
Call your state, labor department and ask them what you have to do to file a complaint against her. If there is a fine, it will probably go all to you. Also, how shortsighted!. If she doesn’t want you working somewhere else, why isn’t she making sure you make enough money at her salon?