Level 3

Question

1099-NEC

Forum|Forum|5 years ago
May 8, 2021
2 replies
12 views

Texas taxpayer. Received 1099-NEC with no income tax withheld and amount shown in Box 1 as Nonemployee Compensation. I believe taxpayer is an employee and not a contractor. If filed as "Uncollected Social Security and Medicare tax on wages," it calculates and taxpayer owes, which I believe is the correct filing. However, if calculated under "Form 1099-MISC/NEC, Nonemployee Compensation" a critical error message is received that income, etc. must be entered and I won't be able to file return. I don't really know the true agreement between employer/employee, but believe employer is using nonemployee incorrectly since taxpayer works in employer office, uses employer computer, and probably works a standard business day at direction of employer. How should I handle?

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George4Tacks

Level 15

Does your client do this for more than one company?

https://www.nolo.com/legal-encyclopedia/what-should-you-do-if-youve-been-misclassified-independent-contractor.html

Answers are easy. Questions are hard!

C

catbrennerAuthor

Level 3

Thanks for your reply and the link. No. Only works for this company.

T

TaxGuyBill

Level 15

@catbrenner wrote:

However, if calculated under "Form 1099-MISC/NEC, Nonemployee Compensation"

I don't really know the true agreement between employer/employee, ... and probably works a standard business day

There is no need to enter the 1099-NEC into the program. You just report the income where it belongs.

If you don't know the true agreement, you should REALLY find out the details before taking such as stand. "Probably"? Did you ask the taxpayer? You certainly can NOT be doing this without more details. Are you also filing Form SS-8 to get a determination from the IRS? That requires all of the details.

The fact that the taxpayer filled out a W-9 (rather than a W-4) and was not having tax withheld seems to indicate he might have known he was being paid as a contractor, rather than an employee

You should also warn the client that if he is still working there, the employer will likely be quite upset at the situation when the IRS contacts them.

qbteachmt

Level 15

"I don't really know the true agreement between employer/employee"

There is no such thing that matters. The IRS classification matters. They can agree or disagree, but that doesn't create Law.

Don't yell at us; we're volunteers

A

AngelWinks

Level 2

I have a VERY similar situation and all this help is much appreciated. The only difference (and I have extensively interviewed my client for details on this 1099NEC) is client is adamant she is an employee.

These are things that make me doubt that:

1) She signed a contract, that to me clearly indicates employer is indicating it is indeed a CONTRACT, and then it states after a "probationary period" of about 18 months she would be "hired" as an employee (seems like a long time but I digress).

2) She has never been self employed in this or any other kind of business. However her contract clearly states that she may want to consult a professional to help her with her withholdings (that's where this started).

3) She is working like all other employees, under control of "employer" EXCEPT she is denied payroll withholdings and insurance provisions until this "probation" is over with. THEN she will be a full fledged employee. Barring the facts listed above and considering the IC vs SE rules - the RULES would say she is an employee. She does not have any control, her hours, place of work, etc., use of their offices and equipment all lean toward employee - but there is that contract also!

4) She has not discussed this with her employer, but now that she realizes she may have to pay all the payroll taxes (fica etc) she is adamant to report it as misclassification (again but there is that contract!)

5) I advised her that this could indeed lose that job for her if she does just "rat out" employer. She still wants to.

6) I did forget to ask about whether she filled out a W4. My head is spinning. A couple responses here have cleared it up some but any other input would be helpful! I still cannot figure out - IC or SE??? I think she'll have to do an SS-8 first before we even file this return also.

The amount she made btw is $9200. This is will continue into next year also.

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