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Additional Details
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Jim B | My employer has issued me a 1099 instead of a w2? |
Although I knew my employer was not withholding taxes from my checks I knew that I would have to pay at end of year and have prepared for it. But then I got a 1099, in all the information that I have been able to look into I do not fit into this catagory. I was a full time employee doing the same thing each day. When I asked about this I was told that this is how their accountant told them to do it. Help!!! what can I do? I was expecting to pay about 8.39% but from what I can figure it looks like it will be much more since I have no business expenses, no licenses and never knew that I was suppose to be basically a small business. Do I have any recourse here?
Additional Details
To answer a few of these questions. No I did not sign any forms when I started. I was told what was to be done, when it needed to be done and where it needed to be done. I was also paid by the hour and not by the bidding for a job or on a pre established rate for the job...why I thought it was not wages that should be on 1099 but on w2. |
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rhubardpi
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Contact the IRS for Form SS-8, which you can fill out as your basis why you were an "employee" and should have had taxes withheld from your pay. The IRS then should send an SS-8 to the outfit that gave you the 1099, they should complete it as to their basis for treating you as an "independent contractor". IRS will make a ruling as to whether you are employee or not. Ask IRS in meantime how do you file your 2006 tax return. Alsways write down name, title, ph # etc of those in IRS who you talk to and gist of what they said and save this with your tax records. Best if you can get to an IRS office for advice. Ph 1 800 829-1040. Or chaulk it up to lesson learned and file sch C and SE with 2006 Form 1040. |
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blue_eyes
 |
Was there an agreement between you and your boss when you were hired that you are an independent contractor?
If you feel you should have received 1099 in error, you can contact IRS and let them know of your situation. They will send notice to your employer requesting their reasons for issuing 1099 instead of W-2.
When filing your tax return, you can report your income as W-2 wage. Attach a statement explaining why (IRS publishes a guideline for employee v contractor). If IRS agrees with you, they will bill your employer for his share of payroll taxes. |
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T G
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If you write to the IRS and explain the situation to them, chances are your "employer" will soon get an education on what constitutes an independent contractor vs an employee. |
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montec4u@sbcglobal.net
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This can be a tricky situation. Despite what the accountant has advised the business owner, there are certain conditions that must be met to be considered an employee or an independent subcontractor. Check the IRS web site irs.gov. For each situation it must be established what kind of working relationship exists.
Did your employer have you sign any documents when you began working? Do you establish your own hours? Who determines what you make [do you bid for jobs or does the employer pay you by the hour]?
The fact that the employer did not withhold taxes does not necessarily relieve them of the responsibility to pay the matching FICA or the Medicare taxes. |
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WealthBuilder
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There are good comments above me.
The basic skinny: You got screwed. You will have to pay not only income tax and your social security/Medicare tax (7.65% of your wages), but the EMPLOYERS share as well. You also get no benefits, and if you are layed off, you can't collect unemployment comp.
Good luck. |
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jseah114
 |
Sounds like your employer is treating you as an independent contractor versus an employee. Your employer can benefit from this because
1. they don't have to provide you with benefits
2. they don't have to pay unemployment tax on you
3. they don't have to cover you for workmen's comp
4. they can let you go at any time without recourse
5. they don't have to pay social security and medicare for you
If you were expecting to pay about 8.39%, this is way too low. Just looking at social security and medicare tax itself, that is 7.65% for just the employee portion. Now that you are considered self employed, you'll need to double that (you will have to pay both the employer and employee portion).
Of course, you can always go back and sue on the premise that you are truly an employee and not a contractor. This could cost your employer quite a bit, because they would need to provide you with benefits, contribute to taxes for you, etc. The general rule that the IRS has followed in previous cases (i.e. Microsoft) is that if the employee can dictate to you what work is to be performed, where the work is to be performed, and how it is to be performed, then you are an employee and not a contractor. |
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tc0101
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If you use tax preparation software, it will walk you through the process, but YES, in my experience, you will be paying more. Basically the 1099 form is for reporting income that (usually) is not your regular income. That means, much like working overtime, there is a higher tax penalty associated with that income. I have only received 1099 forms for selling stocks or part-time jobs, but I have noticed that the income is taxed at a different rate. You may not have a desirable option, but if this is the case, you will know to be prepared next year.
It is also worth mentioning that the IRS assesses a penalty on taxes being underpaid during the year for those with W2s. Some portion of the higher tax rate on 1099 income may be to offset the fact that taxes ARE withheld until the end of the year. Kind of a 'built-in' underpayment penalty. |
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Fool in the Rain
 |
Unfortunately, no. The worst thing is your employer has also sent a copy of that same 1099 to the IRS. Which means if you don't file and include that income, the IRS will be sending you letters come summertime asking why. They have paid you as a non employee. Employers are supposed to withhold federal wages and state but the 1099 is their way around it. You'll have to file a Schedule C and report the income.
If you continue to work for them, either demand they start withholding taxes. Or start paying estimated payments to the IRS. Which isn't fair to you at all. But you are also reeking the benefits of getting paid what you gross. Do you have any dependents to offset the tax you might owe? Do you own your own home? May benefit you to let a tax professional look at your situation to see if you qualify for any credits or deductions. Good luck. |
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steven joly
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Well you qualify, from what you've said, as an employee...under every condition mandated by the IRS. Your employer was trying to duck paying federal payroll tax, social security (his half-7.65%), and unemployment tax....so besides all that, if you were to lose your job, you wouldn't have been able to collect unemployment. |
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