@bmfreelove43 wrote:
I get a W-2 but it is not marked on my W-2. I believe. He does not take taxes out of it
Note: there may be special rules for real estate agents who get paid salary plus commission; and there are special rules for "SPIFFs" (where the manufacturer pays an incentive directly to you for selling a product, in addition to the salary paid by your employer). For these special situations, please provide more details.
For almost all other situations, if you are paid salary plus commission, the entire amount is considered "wages" and is subject to tax withholding (federal, state, social security and medicare) and should be reported on your W-2 as taxable wages. By not including your commission on your pay stub or W-2 and not withholding taxes, your employer is breaking the law. Some of the effects are, they are underpaying the employer share of social security and medicare tax, they are probably under-paying their state premiums for unemployment insurance and workers compensation. The effect on you is that you will pay double for social security and medicare (15% instead of 7.65%) and you might owe penalties and interest for not having tax withheld from the commissions during the year (or not making estimated payments), even if you pay in full when you file.
If you want to go along with the fraud and not make waves:
You would treat the commissions as "self-employment income." You include a schedule C with your tax return, using the Turbotax Premium Online or Deluxe or higher desktop versions. Report the commissions as self-employment income not on a 1099. You can't deduct any business expenses. Your commissions will be added to your taxable income, plus you will pay 15.3% self-employment tax (which is the equivalent of the 7.65% employer share of social security and medicare plus 7.65% employee share).
If you want to file correctly:
Ask your employer for a corrected W-2 listing all your wages and the appropriate taxes. If they refuse, report the commissions under "other uncommon income" and check the box under "Special Circumstances" for "This income should have been included on my W-2." This will trigger Turbotax to include a form 8919 with reason code H to report the income. You will pay income tax and the 7.65% employee share of social security and medicare, but not the 7.65% employer share. The IRS may contact the employer to investigate.
https://www.irs.gov/forms-pubs/about-form-8919
Note that if the employer issues you a 1099-NEC for the commission payments, the procedure is still the same. The don't-make-waves procedure would be to report the 1099-NEC as self-employment income. The legally correct procedure is to ask the employer to cancel the 1099-NEC and issue a corrected W-2, and if they refuse, file using form 8919.
You may also wish to file an unfair labor practices complaint with your state government.
