I am self employed with 1099 income. Can I run payroll for my self and also another employee? Do I need to take a EIN or use my SSN for this purpose?

Forum|Forum|5 years ago
December 15, 2020
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TurboTax Live Self Employed

Best answer by VolvoGirl

If you pay an employee you need to get a EIN, withhold taxes

and file quarterly payroll reports. Then give them a W2 at the end of the year.

Or you might have paid them as n independent contractor. Then you give them a 1099Misc or the new 1099NEC just like you are receiving a 1099Misc.

Either way you do not issue yourself a W2 or 1099Misc. You do not pay yourself. Sole proprietors cannot take a withdrawal or salary and include it as an expense on their tax return. As a sole proprietor, you are not an employee of the business. You don't pay yourself or enter a salary or withdrawal for yourself. All the business income and expenses are your personal income and expenses in the first place. You just fill out a Schedule C. The net profit or loss is your income. If you have a net profit of $400 or more on schedule C you will pay SE self employment tax on it in addition to your regular income tax. It's all included on your personal 1040 form.

VolvoGirlAnswer

Level 15

If you pay an employee you need to get a EIN, withhold taxes

and file quarterly payroll reports. Then give them a W2 at the end of the year.

Or you might have paid them as n independent contractor. Then you give them a 1099Misc or the new 1099NEC just like you are receiving a 1099Misc.

Either way you do not issue yourself a W2 or 1099Misc. You do not pay yourself. Sole proprietors cannot take a withdrawal or salary and include it as an expense on their tax return. As a sole proprietor, you are not an employee of the business. You don't pay yourself or enter a salary or withdrawal for yourself. All the business income and expenses are your personal income and expenses in the first place. You just fill out a Schedule C. The net profit or loss is your income. If you have a net profit of $400 or more on schedule C you will pay SE self employment tax on it in addition to your regular income tax. It's all included on your personal 1040 form.

K

krishnadasikaAuthor

Level 2

Thank you so much for your reply. I have been working on W2 all these years and Contributing to Social security. I would like to continue to contribute (I am under the impression if I don't continue to contribute, my Social security benefit will be effected - please correct me if my assumption is wrong). Additionally, I would like to know if there are any taxes I need to pay?

My situation is like this (Numbers may vary in reality)

1099 Misc income - 100k

I want to pay my son who is helping me - 40k

I have office and other expenses - 10k

What is the best way to file the above?

VolvoGirl

Level 15

You need to use the Online Self Employed version. Or you can use any Desktop program but you will get the most help in the Home & Business version.

You need to report all your income even if you don't get a 1099Misc. You use your own records. You are considered self employed and have to fill out a schedule C for business income. You use your own name and ssn or business name and EIN if you have one. You should say you use the Cash Accounting Method and all income is At Risk.

After it asks if you received any 1099Misc it will ask if you had any income not reported on a 1099Misc. You should be keeping your own records. Just go through the interview and answer the questions. Then you will enter your expenses.

FOR 2019

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment. You pay 15.3% SE tax on 92.35% of your Net Profit greater than $400. The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare. So you get social security credit for it when you retire.

The SE tax is already included in your tax due or reduced your refund. It is on the 1040 Schedule 2 line 4 which goes to 1040 line 15. The SE tax is in addition to your regular income tax on the net profit. You do get to take off the 50% ER portion of the SE tax as an adjustment on 1040 Schedule 1 line 14 which flows to 1040 line 8a. Turbo Tax automatically calculates the SE Tax and Adjustment.

For 2019 Schedule C Net Profit or Loss now goes to 1040 Schedule 1 line 3. Then the total on schedule 1 line 9 goes to 1040 line 7a.

Here is some IRS reading material……

IRS information on Self Employment

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center

Pulication 334, Tax Guide for Small Business

http://www.irs.gov/pub/irs-pdf/p334.pdf

Publication 535 Business Expenses

http://www.irs.gov/pub/irs-pdf/p535.pdf