You might be able to argue that this should have been wages, and that she should only pay the employee half of Social Security and Medicare tax at 7.65% instead of self-employment tax at 15.3%. If she wants to make this argument, there is a box for special circumstances after entering the 1099 that you can check for “this should have been wages on a W-2.“ TurboTax will prepare a form 4852 substitute W-2 and will only assess the employee half of the employment taxes. You will also have to prepare a form SS-8 to explain the circumstances and ask the IRS to review the situation and determine her employment status. If the IRS determines that she should have been classified as an employee, they may penalize the employer. If the IRS determines that she was properly classified as self-employed, they will send her a bill for the other half of the self-employment tax.
I haven’t seen too much about this issue. This kind of training is often sponsored by a union, and the worker is not really an employee of the union even though the union is providing them a stipend during their training. However, the fact that the training is probably offered at a specific location and specific time and manner dictated by the union may lead to her being classified as an employee.
