@Cindy M wrote:
I simply want to know if they are required to pay taxes on already taxed income? I work for a cleaning service part time and pay someone to help me from my own pocket but the money I received has already been taxed for federal, social security and Medicare. I understand that they are required to file for their income. My question is to decide if we need to have them paid directly from the company to avoid double taxes on that same income or are they safe from taxes considering it was already taxed.
Your information is conflicting and does not make sense.
If you are paid as an employee on a W-2, and you use some of that money to hire a helper, then they are required to pay income tax even though you also paid tax. And you can't deduct the expense. This is also a really dumb thing to do. They are self-employed (as your subcontractor) and are required to file a self-employment tax return, even if they don't get tax paperwork. It is not clear if you need to issue a 1099-NEC in this case because it is not clear that you are acting as a business.
If you are paid for a side-gig and receive a 1099-NEC, you are self-employed, at least for that side-gig. If you hire a helper, then you either have an employee (to whom you must give paychecks, and a W-2) or you have a subcontractor. If you hire someone as a subcontractor, you pay them, and you issue a 1099-NEC to them if you pay them more than $600 in a year. You report your side gig as a self-employment business, and you can deduct the payments to the helper as a business expense, so they are not taxable to you, only to the helper.
