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independent contractor issue

18-year-old college freshman spent last summer working as a lab assistant in a state university in his hometown (not the school he attends as a full time student.) The university employer did not withhold any taxes. Apparently they considered him an independent contractor, despite the fact that he apparently met none of the criteria. (As a lab assistant, he was clearly not using his own equipment; he was supervised and trained by the employer; he did not set his own hours, etc.) His total earnings from the job were about $5,100. Also had a small amount of interest income (under $25.) Employer did not send him a W-2 or a 1099.
He is a dependent student, so clearly he needs to file a

tax return and he will have some small income tax liability on his taxable income of approx. $125. Any opinions about where he should report his wages of $5,100? On line

7 as wages or on a schedule C-EZ with SE?

Is he liable for SE tax? Can he just pay his half of FICA? If so, what is best way to handle this? Thanks

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Reply to
Mary
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Form 4137 is the form to use when this happens. This way the s/he will only have to pay their half of the SS & medicare. Missy Doyle

Reply to
Missy

When he got his first "pay" check, and no taxes were deducted, he was put on notice as to his status, and since he continued to work as an independent contractor, then yes, he does owe the se tax on said renumeration. ChEAr$, Harlan Lunsford, EA n LA

Reply to
Harlan Lunsford

Though from a legal standpoint he was probably an employee.

Stu

Reply to
Stuart A. Bronstein

Use Form 4137 to report the income and calculate FICA and Medicare taxes - and, BTW, cross out everywhere it says 'tips' and write in 'wages'. The student should also file a Form SS-8 (under separate cover). That way the IRS will investigate and make a determination whether the student should have been classified as an employee or as an independent contractor. If they determine that he was indeed an employee, the student will have no more paperwork to file, but the employer will have to pay their half of the FICA and Medicare taxes. If the IRS determines that the student was an independent contractor, the student would then owe the other half of the FICA and Medicare taxes, and a very small amount of interest and/or penalty. If you only file the Form

4137, the IRS (or SSA) may eventually come back and say: "Where is the other half of the taxes due?" (plus penalties and interest). The time to fix things is now. Also, on the 'income' line of what ever tax form he uses (e.g.: line 7 of the 1040), on the dotted line before the numbers column write in: "SS-8 filed". That way they will not write back asking about a missing W-2 or 1099. I encountered a very similar situation with my 19 year old daughter babysitting last summer at a local couple's home. I guided her through the process, and she filed an SS-8 and the Form 4137. She recently received a copy of a 5 page letter from the IRS confirming her claim as an employee and guiding the employer through the process to pay the taxes due.
Reply to
tobe

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