The lovely wifey quit working for the man and became a contractor about a year and a half ago. In reality, she is an employee, but her “client” insists on calling there people contractors. She is therefore for tax purposes, self employed. That is not a bad thing because she makes alot more money AND as a tax guy, I know how to take advantage of the situation.
So, she was informed last week that they are shutting down her project and there is a very good chance she could be without any income. They are trying to find her work in other projects, but its undetermined as of yet as to whether that will happen.
It is my understanding of the whole unemployment benefits thing, that in order to qualify, you must have been laid off or the like. That under wifey’s situation, she is unable to apply for benefits. Is that correct?
I know that there are ways to have the IRS review the whole employee/contractor relationship. However we will not do that. We knew going in what the situation was, and will not try to change the rules we accepted back when she got into this whole deal. My question only deals with her qualification to apply for unemployment benefits.
I don’t know about the unemployment issue. But one thing you can do is not make any more quarterly payments to the IRS for tax purposes. Apparently the guy running treasury does not think paying taxes is all that important. How is that for some economic stimulus?
But one thing you can do is not make any more quarterly payments to the IRS for tax purposes. Apparently the guy running treasury does not think paying taxes is all that important. How is that for some economic stimulus?
The guy is asking for some actual help with his wife’s difficult situation and you bring up this? What’s wrong with you, seriously? Honest question. Do all the Obama-bashing you want, but let this guy get the advice he is looking for, not stupid remarks from an internet troll.
Unemployment is funded from taxes taken out of your paycheck. If she is self employed she has no employer to draw from. She should apply anyway and see what happens.
I went through exactly this in 2001 in NJ. I was not eligible for unemployment benefits because I was paid as a 1099 (“contractor”) not a W-2 (or W-4?) (“employee”). The company did not collect unemployment tax from me, so the state did not provide unemployment benefits.
Sorta seems lame, as NJ made a whole lot more from me when I changed from employee to contractor.
Actually had she created a corporation, hired herself as an employee, paid all the appropriate taxes she could have been both “Self employeed” and eligable for unemployment.
Sorta seems lame, as NJ made a whole lot more from me when I changed from employee to contractor.
Except they would have made even MORE from you had you been paying the unemployment tax…which can be as high as 8-9% in Illinois on the first “X” (Can’t remember the amount) amount of wages. That’s in addition to all the other taxes.
We hire a lot of “contractors” I’m not sure what industry your wife is in, but we hire IT talent from contract companies (aka pimps) If your wife is in technology there are lots of contracting companies she can sign on with that will continue to pass her resume along to potential clients and they’ll take a fee once she has a gig. The better skilled the more money she can charge per hour and the fee that the company takes is sometimes a bit less. Once she gets some knowledge of the market, and some of the players in it, she could chose to contract for herself and potentially pimp for other contractors and take the cut off the top.
Benefits from her end, are that she gets paid more, and if she gets benefits through your employer it’s a bigger win. Benefit from the clients side, is that they can usually end the contract with as little as a day or in some cases as much as a months notice with no other reason then we don’t like you go away. The other benefit from her side is that she could start a new project every so often and be able to keep her skills up to market speed which can be hard if you’re a full timer for a company.
Sorta seems lame, as NJ made a whole lot more from me when I changed from employee to contractor.
Except they would have made even MORE from you had you been paying the unemployment tax…which can be as high as 8-9% in Illinois on the first “X” (Can’t remember the amount) amount of wages. That’s in addition to all the other taxes.
As a side note. I found out my contract is ending early, by 4 months, and am scrambling to find work. I posted my resume on Careerbuilder, Monster.com and Jobster. Since then I’ve gotten 4 emails from recruiters and one of them did a phone screen with me. The other 3 are with a meat market contracting agency so I’m putting them in my back pocket for now.
If I get a job, it will be the third one I’ve gotten off of Monster. All of them have approached me and all of them have included a pay increase. As a contractor it can be stressful right now so spreading the word beyond her immediate network will likely be necessary.
As a 1099 I don’t think you can qualify for unemployment because you never were considered an employee. For tax purposes as you know, she is considered the “employer and the employee” as she pays both sides of the Social Security and Medicare taxes. But i’d take 1099 over W2 any day with decend “income” just for the SEP plan that is a huge advantage, not to forget all other deductions.
Somebody correct me if I’m wrong, but I don’t think that 1099’s are part of the “unemployment” statistic. As such, the unemployment numbers are skewed as there was a shift towards 1099s from W2s in the recent 10 years.
Somebody correct me if I’m wrong, but I don’t think that 1099’s are part of the “unemployment” statistic. As such, the unemployment numbers are skewed as there was a shift towards 1099s from W2s in the recent 10 years.
I think this is correct and I think I first saw this mentioned back when the dot bomb exploded. Many IT folks were on “Contract” and never showed up as unemployed. I believe the statistic also does not include “under employed”, people who’s hours have been cut, and “long term unemployed”, people who’s unemployment has run out but still have not found a job.
So assuming we’ve been losing jobs for quite some time now and some haven’t “Recovered” from the explosion in 2000-2001, actual “unemployment” is probably significantly higher than what us reported.
That is the “NJ UI” tax that is withheld by employers, and which shows up on my W-2 as taxes paid.
I’m not sure about NJ but in Illinois the employees pay nothing and the employers pay everything. I’m guessing the same in NJ.
Actually just looked it up and HERE it is.
Looks like the employee in NJ pays a rate of .385% while the employer pays 2.685%. Also looks like they run a similar scam to Il by adjusting the rate according to how many people collect from your company.
So If you wanted to collect unemployment you could create a corporation and hire yourself and then hire yourself out as a “Contractor” but as an employee of company “X”.
The employee would have to pay .385%, I’m guessing on some “X” amount of income as it is in Illinois, while the employer would have to pay 2.685%, roughly 7 times what the employee pays.
In Illinois the employee pays nothing and the starting rate for the employer is around 3%, again on some “X” I can’t remember.
However they nail you for the highest rate, approaching 8% more, for 3 years upon start up because you have no unemployment history. After that time you drop down to the lowest rate IF you’ve had no claims. OTOH they do a similar “Rate” adjustment based on number of employees in the company and how many months of benefits have been claimed against the company. For a company like mine, 5-7 people, it takes very little to shoot us back up to the highest rate…which we stay at until we have 3 years with no claims.
Thus, at .385%, the max is $110 for an employee, or just north of $100, as I said.
But my point is that as a “contractor” you’re not an “Employee”. If you were an “Employee” the “Employer” would be paying an additional 2.685% on behalf of the employee. It’s not like the employee pays 110$ and gets benefits, the system would go broke. The employer, assuming the same cut off, which I’m not sure of, would be paying an additional ~765$ so a total of 8-900$ or so.
So as I said if you “Hired” yourself, 110$ would come out of your paycheck, but the your employer, in this case you, would have to pay an additional ~700$. So for 8-900$ a year you would have unemployment insurance.