I'm sorry to overlook your question and I just spoke from my own experience. Fed & state requires certain tax withholding amount based on your income otherwise certain "fine" would be imposed. I live in Iowa and my withholding is very little to about enough to offset my tax liabilities. Normally when tax time come, I would break even on both fed and state or pay them very little, and I always file 2-3 days before 04/15.
I don't think you have to tell your boss anything regarding your withholding, it's none of his business anyway.
I don't think you have to tell your boss anything regarding your withholding, it's none of his business anyway.
more then likely your employer is going to tell you know....even though there shouldnt be anything legally stopping you from doing so your employer is more then likely is a sheep and will fear tinkering with taxes/withholdings
go ahead and ask but i wouldnt hold my breath
there is an exemption to this but you have to make less then $850 a year...thats to just not pay at all though...the subject of not paying and then paying at the end of the year doesnt seem to have any info out there
first the fine print, then I'll answer your question
whether or not you're an employee or you're self employed is not really decided by you and your "employer", but rather by the facts of the case. You tend to be an employee and your wages subject to withholding taxes if you're paid hourly, if you have no risk of loss, if you work when and where and how your "employer" determines, if you have no other clients and if you otherwise do not conduct business like you're in business for yourself. You tend to be self employed if you have risk of loss, work for a contracted amount, you solicit similar work from other people and you otherwise conduct business like you have your own business. There are other variables.
There are ways to structure your relationship to minimize the chances of your relationship being reclassified under audit. Needless to say, many people simply ignore laws and do what they want anyway, and most never have any problem. The employer, not the employee, has more exposure when doing things improperly.
Now to answer your question.
the benefits/issues of being an employee.
1) employer pays 1/2 of social security and medicare taxes, 7.65% of gross. Self employed individuals pay all 15.3 % themselves.
2) employer pays for unemployment benefits and you can collect if layed off. Self-employed individuals cannot collect. This is extremely important if work is inconsistent or seasonal.
3) employer pays workers compensation insurance, so you can continue to get paid if you get hurt on the job. This is important in high risk industries.
4) you may be eligible to participate in employer benefit programs like health insurance of retirement plans.
the benefits/issues of being self employed
1) more take home pay initially, but this could be a red herring at the end of the day
2) it gives you an opportunity to deduct work related expenses, which could potentially save you tax dollars at the end of the day.
3) you should purchase your own liability and disability insurance (increased costs)
4) since the employer saves on payroll taxes, workers' compensation insurance, administrative costs and the expenses of any benefits he provides, you should ask him for more money. The employer saves at least 10%, and maybe even 30 to 40% depending on your industry, the state you live in and the benefits he provides. For example, workers' compensation insurance in the construction industry is 20+% in CT.
Needless to say, you need a good accountant if you're going to be self-employed.
whether or not you're an employee or you're self employed is not really decided by you and your "employer", but rather by the facts of the case. You tend to be an employee and your wages subject to withholding taxes if you're paid hourly, if you have no risk of loss, if you work when and where and how your "employer" determines, if you have no other clients and if you otherwise do not conduct business like you're in business for yourself. You tend to be self employed if you have risk of loss, work for a contracted amount, you solicit similar work from other people and you otherwise conduct business like you have your own business. There are other variables.
There are ways to structure your relationship to minimize the chances of your relationship being reclassified under audit. Needless to say, many people simply ignore laws and do what they want anyway, and most never have any problem. The employer, not the employee, has more exposure when doing things improperly.
Now to answer your question.
the benefits/issues of being an employee.
1) employer pays 1/2 of social security and medicare taxes, 7.65% of gross. Self employed individuals pay all 15.3 % themselves.
2) employer pays for unemployment benefits and you can collect if layed off. Self-employed individuals cannot collect. This is extremely important if work is inconsistent or seasonal.
3) employer pays workers compensation insurance, so you can continue to get paid if you get hurt on the job. This is important in high risk industries.
4) you may be eligible to participate in employer benefit programs like health insurance of retirement plans.
the benefits/issues of being self employed
1) more take home pay initially, but this could be a red herring at the end of the day
2) it gives you an opportunity to deduct work related expenses, which could potentially save you tax dollars at the end of the day.
3) you should purchase your own liability and disability insurance (increased costs)
4) since the employer saves on payroll taxes, workers' compensation insurance, administrative costs and the expenses of any benefits he provides, you should ask him for more money. The employer saves at least 10%, and maybe even 30 to 40% depending on your industry, the state you live in and the benefits he provides. For example, workers' compensation insurance in the construction industry is 20+% in CT.
Needless to say, you need a good accountant if you're going to be self-employed.
well, mostly no, your employer is required by law to withhold payroll taxes.
There are no exceptions to withholding the 7.65% for social security and medicare taxes.
If you don't believe you will owe federal income taxes or you usually get big federal refunds, you can submit a new W-4 Form and claim more exemptions thus reducing the amount being withheld for federal income tax purposes. The amount of exemptions you claim has nothing to do with your family size.
I do not know Michigan tax laws, and can't comment on them.
PS: after re-reading this thread, it seems you can ignore my post about being an emplyee vs being self-employed.
hno:
