1099 employee

I am sure you will get a lot of advice from tax professionals (which I am not), but your subject is a contradiction in terms. You cannot be a "1099 employee". You are either an employee who should receive a W2 and have all taxes and SS withheld, or you are a self employed independent contractor who receives a 1099 and pays his/her own tax and SS. You can't be both at the same time.

The IRS has many rules as to who is an employee and who is a contractor, but generally a person is an employee if the employer can control what will be done and how it will be done. On the other hand, the person hiring an independent contractor has the right to control or direct only the result of work done by an independent contractor, and not the means and methods of accomplishing the result. In other words a contractor manages himself and an employee is managed by the employeer.

The IRS has a list of questions on their web site (irs.gov - just search for independent contractor) or use this link for more info:

If you feel that you have been misclassified you can file a SS-8 form (Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding) to request that the IRS make that determination for you.

If you have been misclassified you may be able to treat the 1099 as a W2 and the IRS may go after the employer for the back taxes.

I am sure other will give more information.

- What is your position?

- What is your employer's industry?

Both are significant issues in determing the ethics of your contract!

- How many other people in this company are in a similar situation?

- How difficult will it be for you to find another position?

Both are important issues in determining your options!

Keep in mind that you do owe 50% if FICA and Medicare. However, your employer has underwithheld trust funds. If my understanding is correct, that is a 100% penalty!

Answer the above and I and others will lay out your options for you. Do so quickly.

Dick

Keep in mind that you do owe 50% if FICA and Medicare. However, your employer has underwithheld trust funds. If my understanding is correct, that is a 100% penalty!

I'm sorry for such a delay in checking back, I had a stressful day of doing other business' tax calculations! Yes, that's my business, calculating the retirement plan contributions for employers! You would think I would have had a better understanding of my own situation.

To my knowledge there are 3 "employees" working as independent contractors from our homes. (Though I now understand I am using the wrong terminology by calling us employees - thanks Ernie!!) There are about half a dozen doing similar job, but work full time at the office.

I looked at the list of 20, and for the most part, I agree that I'm an independent contrator. And since I'm the one who agreed to this position, I definately do not want the company penalized in any way. So I guess I just need to suck it up and pay these taxes.

I'm guessing I need to plan better for 2008 also...yikes! Thanks to both of you for your help, though!! Annie:)

I disagree. This is a negotiation issue. You need to discuss this with your employer. You need a $4,000 bonus right now to cover their end of FICA and Medicare PLUS a 17.5% increase in your rate. You were never made aware of or you never understood the ramifications of your contract.

If you can find other employment, delay filing your return, but pay your end of FICA and Medicare while you look for another job. When you file as a W-2 employee, the IRS will almost certainly agree that you are a W-2 employee and your emploment will be terminated.

Dick