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1099 Versus W-2

Workers Compensation Law Discussion

1099 Versus W-2

Postby Rashae » Sun Dec 04, 2016 4:07 am

I have been working at a small trucking company in Michigan. I have been trying to explain the owner and his partner that paying a direct employee of the company on 1099 is illegal. They don't seem to understand! I am an operations manager and I work in thier office in thier building using company computers and telephones to book trucking business daily. I do not come and go as I please and am directed by them as what to do everyday. I feel they need to hear this from a professional other than myself so they would understand exactly what the law is. What are the penalties for the company if any? What can I do to convince them this is not good for them or myself.
Rashae
 
Posts: 51
Joined: Sun Jan 19, 2014 2:09 am

1099 Versus W-2

Postby acel7 » Sun Dec 04, 2016 2:42 pm

Perry,

You sound like an employee to me. Here is the web page from the IRS that explains to employers how to tell if a worker is an employee or an Independant contractor. It gives the criteria for both.http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

I hope it helps.

Here is a short brief from the page and directions on how to have a determination from them on whether or not the job is employee or independent contract. If the form is filled out they will determine it for the employer. The form is the SS-8 form.

Common Law Rules

Facts that provide evidence of the degree of control and independence fall into three categories:

Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?

Financial: Are the business aspects of the worker’s job controlled by the payer?(these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)

Type of Relationship: Are there written contracts or employee type benefits(i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.

The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.

Form SS-8

After reviewing the three categories of evidence, if you are still unsure if a worker is an employee or an independent contractor, the business can file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding(PDF) with the IRS. The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker’s status.

Be aware that it can take up to six months to get a determination, but a business that continually hires the same types of workers to perform particular services may want to consider filing the Form Form SS-8(PDF).

Here are the consequences of misclassification

Misclassification of Employees

Consequences of Treating an Employee as an Independent Contractor

If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker(the relief provisions, discussed below, will not apply). See Internal Revenue Code section 3509 for more information.

Relief Provisions

If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. You(or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. See Publication 1976, Section 530 Employment Tax Relief Requirements(PDF) for more information.

Misclassified Workers Can File Social Security Tax Form

Workers who believe they have been improperly classified as independent contractors by an employer can use Form 8919, Uncollected Social Security and Medicare Tax on Wages to figure and report the employee’s share of uncollected Social Security and Medicare taxes due on their compensation. See the full article Misclassified Workers to File New Social Security Tax Form for more information.

There is a webcast that the employer can also listen to

Worker Classification Webcast

A critical issue for all businesses is properly classifying workers as employees or independent contractors. The IRS’s archived Tax Talk Today Webcast, “What’s Hot in Employment Taxes: Independent Contractor or Employee?,” focuses exclusively on worker classification issues.

Good Luck.

Shirley  
acel7
 
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Joined: Wed Jul 31, 2013 11:20 am

1099 Versus W-2

Postby Alvyn » Sun Dec 04, 2016 2:56 pm

I have been working at a small trucking company in Michigan. I have been trying to explain the owner and his partner that paying a direct employee of the company on 1099 is illegal. They don't seem to understand! I am an operations manager and I work in thier office in thier building using company computers and telephones to book trucking business daily. I do not come and go as I please and am directed by them as what to do everyday. I feel they need to hear this from a professional other than myself so they would understand exactly what the law is. What are the penalties for the company if any? What can I do to convince them this is not good for them or myself.
Alvyn
 
Posts: 48
Joined: Sun Feb 16, 2014 8:52 am


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