What should I do if an employer classified me as a 1099NEC instead of an employee? They pay with written business checks without withholds. I didn’t sign for 1099.

[chengstacee]

They didn’t give me any papers to sign to become a 1099. They also didn’t give me a w4 to sign to become a w2. But I did ask them if I was going to receive a w2 during tax time and they said yes but instead I got a 1099NEC what can I do? My employer also sent out the 1099NEC in mid February, I received his mail 2/21/2023. Do I go to H&R Block Tax? Get an attorney? If yes which attorney? Tax attorney? Employee attorney? Please help.

[Bsch4477]

You can get that information here. 

https://www.nolo.com/legal-encyclopedia/what-should-you-do-if-youve-been-misclassified-independent-c...

[Opus 17]

If you think you should be classified as an employee rather than a contractor, start by reading these documents.

https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-o...

To classify your income as employee wages rather than contractor payments, you would need to include form SS-8 with your tax return.  You must provide detailed information about the type of work, how your work is controlled or assigned, and how you are paid.  You would also file form 8919 to report the uncollected social security and medicare taxes.  With form 8919, you would pay 7.65% employment tax instead of 15.3% self-employment tax.

https://www.irs.gov/forms-pubs/about-form-8919

https://www.irs.gov/forms-pubs/about-form-ss-8

In Turbotax, when entering the 1099, check the box for "this was wages that should have been on a W-2" and use reason code G "I filed Form SS-8 with the IRS and haven’t received a reply yet."

Form SS-8 will start an investigation of you and the company you file against.  If the IRS determines you were an employee, the company can face significant penalties.  If the IRS determines you were a contractor, you will have to re-file your tax returns and can be subject to interest and late fees on the taxes you owe. 

[JohnB5677 · Accepted solution]

There are several issues here.

• Under common-law rules, anyone who performs services for your business is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.  Opus17 has several appropriate links. 
• Facts that provide evidence of the degree of control and independence fall into three categories:
  • Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
  • Financial: Are the business aspects of the worker’s job controlled by the payer? (These include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
  • Type of Relationship: Are there written contracts or employee type benefits (i.e., pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
• Bsch4477 Has an interesting attachment regarding misclassification as an independent employee that outlines a course of action.
  • Talk to your Employer. 
  • Get the IRS Involved. 
  • File Your Tax Return with IRS Form 8919. 
• I cannot give legal advice, so you will have to seek a tax preparer and attorney based on your own research.

[chengstacee]

I was a server. i work hourly and gets paid minimum wage. he tells me how many days and hours I work and sometimes he will either call or texts me asking if I can go in early or work an extra shift. 

[LizaJane]

I don't think you can change this after the fact, but I recommend you talk to your state's Labor Department or Attorney's General office. They can tell you next steps.

Basically, your employer paid you as if you were an independent contractor instead of withholding (and paying) some of your Social Security taxes. As it stands now, with your 1099-NEC you will need to file your taxes as self-employed. This might help explain:

https://turbotax.intuit.com/tax-tips/irs-tax-forms/what-is-form-1099-nec/L5fbwIFSn

Good Luck!

[Opus 17 · Accepted solution]

@LizaJane 

no, please read the above answers. The person who believes themselves to be an employee may file form SS-8 to asked to be re-classified as an employee. If they are successful, the business will be penalized.  It is not a done deal or set in stone that the employer issued a 1099-NEC.

@chengstacee 

you can certainly contact the state labor department as suggested, they are likely to be very interested in your situation. However, that will not change your tax situation, and you need to file form SS8 and form 8919 with your tax return to be taxed as an employee. As described above.