Taxing tips of 1099 restaurant employees?

[Davin]

Since I am currently "in between employment opportunities" I have picked up a few shifts bussing tables at the restaurant my SO works at. The owners classified me as a 1099 contractor since I just fill in occasionally. The problem is they have been deducting 25% of my tips as taxes. As a 1099 employee aren't I the one responsible for paying my own taxes? Am I now being taxed twice on my tips? Lastly, where does the 25% rate come from? my marginal tax rate should be much lower since I only earned a couple thousand or so dollars this year in addition to the unemployment insurance benefits I received before they ran out. I know this isn't a lot of money I'm talking about, but at this point, every little bit counts, and I don't like being taken advantage of.

[jpdx]

If you are bussing tables at a restaurant, you are almost certainly an employee, not an independent contractor. It sounds like your employer is misclassifying you. You should have taxes withheld and receive a W2 (not a 1099) at the end of the year.

[Davin]

I believe you are correct that I am misclassified, however, the real issue is whether my employer is casing me to be taxed twice on the tips. 1099 employers aren't supposed to withhold taxes if I understand the situation correctly.

[walkwalkwalk]

You would report the withholding coming from the 1099, basically get credit for having paid it. Since it doesn't sound like they are deducting social security and Medicare, then you would pay employee and employer side social security and Medicare as self employment taxes on your 1040. Hope that clears things up.

[Derbtax]

They shouldn't be withholding on you unless the IRS asked them to, perhaps because you gave them a bad SSN in a prior year. Since this is a new job, there's no way the IRS asked them to do backup withholding, and you shouldn't count on ever seeing it credited to your tax return.

My guess is they do this for their regular wage employees to cover employment tax, unemployment tax, workers comp, etc. Since you're covering these yourself (at least in risk), you should not have a deduction. They should put you on W-2 so you actually get the benefit, or stop the deduction.

[facepalm]

Since you are bussing, you are getting a portion of the tips taken in by waitstaff, and not collecting tips directly. I'm guessing your employer is handling and distributing a percentage of the total tips to you. They are required by the IRS to withhold.

You should probably not be classified as a contractor, since you may be liable for SS and Fica otherwise. But I'm not sure.