Freelance Editor/Self-Employed but one Client wants to give a W2 instead of 1099 -- Problem?

[esm25]

Hello!

My wife is a freelance editor/self-employed with several clients.  A new prospective client indicated they would issue her a W2 for the job she does for them instead of the usual 1099 (not sure why as this clearly seems incorrect---they just said it is better for them logistically).  Will this be a problem or have potential negative consequences on her since she is technically not their employee?  Can she still report/file the W2 income through TurboTax Self-Employed when the time comes to file?

Thank you!

[rjs]

The work for the company that gives her a W-2 will be a regular job, separate from her freelance editing business. They will be her employer, not a client, and she "technically" and actually IS their employee. This should not be a problem. A lot of people have both a regular job and self-employment income.

TurboTax Self-Employed (now called Premium) will handle both the W-2 income and the self-employment income. You enter the W-2 the same as any other W-2. It does not go on Schedule C with her business income.

One disadvantage is that a W-2 employee cannot deduct expenses. If she will have expenses related to the job, she should discuss with the prospective employer how to cover the expenses. They could just pay her more to compensate for the expenses, or they could pay the expenses through an "accountable plan" where she submits expense reports and gets reimbursed. The advantage of an accountable plan is that the reimbursement is not taxable. Additional pay is, of course, taxable income.

[DoninGA]

If she is not their employee, meaning they will not be withholding federal income taxes, Social Security taxes and Medicare taxes from her income, then they cannot issue a W-2.  If they refuse to issue a Form 1099 and pay her in cash, check or other means she can still report the income from this client on her Schedule C without a Form 1099.

Rules for being an employee or independent contractor (IRS) - https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-o...

[Opus 17]

It is possible to be an employee on a short term contract.  The difference between an employee and an independent contractor is not based on the length of the engagement but by who has the most control over the work schedule, output and methods.  Another expert posted the link for you to look at.

It sounds like they want to hire her as a short term employee, rather than an independent contractor.  But she needs to get all this clarified before starting, preferably in writing.