topic W2 vs 1099-NEC in Self employed

W2 vs 1099-NEC

GEAtreasurer — Wed, 30 Aug 2023 23:54:43 GMT

My company switched me from a W2 employee to a 1099NEC contractor as I do not follow a routine/schedule. (I could work weekends, evenings, or sometimes not at all. I can work remotely or in the office but I do not have to "punch a clock.") Can you explain the difference and why the company would switch my employment status?

Re: W2 vs 1099-NEC

JBedford — Wed, 30 Aug 2023 23:59:35 GMT

Thanks for your question, @GEAtreasurer ! This is a bit of a thorny issue. It's clear why the company would change your status, as contractors are generally cheaper than employees. What makes it thorny is whether or not they should have changed your status. The IRS has rules on what constitutes an employee and what constitutes an independent contractor. From this IRS article, the main "tests" are Behavioral, Financial, and Type of Relationship. The article also discusses the ramifications of misclassifying employees.

Hope this helps, please let me know if not!

Re: W2 vs 1099-NEC

LoraineG — Thu, 31 Aug 2023 00:07:23 GMT

I would like to add to @JBedford's answer that it is NEVER optional. It's not up to them (or you for that matter). Those rules need to be followed. If there's a doubt on your classification, you can fill out form SS-8 and have the IRS decide for them.