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garrett-main
New Member

My company went from 1099 to w-2. They then cut my pay from 25% to 23% to cover their half of Medicare and social security taxes. Is this legal?

 
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Accepted Solutions
Hal_Al
Level 15

My company went from 1099 to w-2. They then cut my pay from 25% to 23% to cover their half of Medicare and social security taxes. Is this legal?

Their half of Medicare and social security taxes is 7.65% of your salary.  23/25 = 92%. So, your net pay is about the same as it was before.

It appears, you are coming out about even. However, if you were deducting any expenses against this income, those deductions will be more limited as a W-2 employee and the net tax effect will be less take home pay.

I suspect the change is a result of a legal challenge. Somebody (possibly the IRS or State labor dept.) was complaining about you being classified as a contractor and  not an employee.

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5 Replies
fanfare
Level 15

My company went from 1099 to w-2. They then cut my pay from 25% to 23% to cover their half of Medicare and social security taxes. Is this legal?

Your company put you on a W-2? You had to agree to that. Or go elsewhere.
SweetieJean
Level 15

My company went from 1099 to w-2. They then cut my pay from 25% to 23% to cover their half of Medicare and social security taxes. Is this legal?

Maybe the company got in trouble for misclassifying its workers.
garrett-main
New Member

My company went from 1099 to w-2. They then cut my pay from 25% to 23% to cover their half of Medicare and social security taxes. Is this legal?

I think they did get in trouble for having us as 1099
Hal_Al
Level 15

My company went from 1099 to w-2. They then cut my pay from 25% to 23% to cover their half of Medicare and social security taxes. Is this legal?

Their half of Medicare and social security taxes is 7.65% of your salary.  23/25 = 92%. So, your net pay is about the same as it was before.

It appears, you are coming out about even. However, if you were deducting any expenses against this income, those deductions will be more limited as a W-2 employee and the net tax effect will be less take home pay.

I suspect the change is a result of a legal challenge. Somebody (possibly the IRS or State labor dept.) was complaining about you being classified as a contractor and  not an employee.

View solution in original post

SweetieJean
Level 15

My company went from 1099 to w-2. They then cut my pay from 25% to 23% to cover their half of Medicare and social security taxes. Is this legal?

That is a legal question, not an income tax one.

But, unless you are subject to a collective bargaining contract, they they only have to pay you minimum wage for your state.

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