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  • Employment Tax Question

    Hi All,

    I have a very interesting situation and I don't know if what the company is doing is legal or not.

    Here is the situation:

    Wife works for a company. The company pays her PLLC as a 1099. The company deducts from her collections a billing fee (% of collections), answering service, malpractice, and administrative costs. However, since they deduct this from her collections and THEN give her a 1099, she cannot write-off any of these expenses. Instead, it seems like the business is writing off these "expenses" as their own, but in reality, the "employee" is paying for them. Are they allowed to do this?

    Here is the example with numbers:
    Collections: $10,000
    Company deducts fee (billing, answering service, admin, malpractice): $2,000
    1099 paid out: $8,000

    So my wife cannot write off anything except for gas, restaurants, and other small things.

    It doesn't seem right that the company deducts and THEN pays out, because they get to write off the expenses instead of her even though she is the one paying for it. They do this for 20 other people working for this company. The admin fee goes to 3 people who started the group, so I imagine they write everything and then get a tax-free admin fee.

    Any thoughts are appreciated.

    Thanks so much.

  • #2
    How it is now:

    Gross earnings $10,000 - $2000 overhead = $8000 net to your wife for salary, taxes, etc.

    The other way:

    Gross earnings $10,000 to your wife - $2000 overhead = $8000 net to your wife for salary, taxes, etc.

    Am I missing something?

    Comment


    • #3
      Originally posted by VagabondMD View Post
      How it is now:

      Gross earnings $10,000 - $2000 overhead = $8000 net to your wife for salary, taxes, etc.

      The other way:

      Gross earnings $10,000 to your wife - $2000 overhead = $8000 net to your wife for salary, taxes, etc.

      Am I missing something?
      I see what you're saying, yes, seems right to me. Ha. Sometimes I overthink things. Thanks my friend.

      Comment

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