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  1. #1
    Join Date
    Feb 2011
    Posts
    4

    Default When Does a 1099 Contractor Have to Change to a W-2 Employee

    My question involves independent contractors in the state of: New York

    I am a sales consultant in NY and a 1099 contractor for a company which is based in the DC area. For all intents and purposes, much of my job operates as if I am a full-time employee even though I work from home when I am not on sales calls. I have worked with the company for 1 year and my accountant says that I should be a W-2 employee because of the disbursements that are paid to me including social security, a medical disbursement, expense account, commission and base pay. He said that it all counts as income, for which I got taxed pretty heavily. Are there any legal ramifications to staying a 1099 as I move forward with this job? Also, my boss didn't issue me an actual 1099 form, but a spreadsheet with the year end totals. Is this legal? Since the company is not based in NY, can I still become a W-2?

  2. #2
    Join Date
    Dec 2007
    Posts
    2,360

    Default Re: When Does a 1099 Contractor Have to Change to a W-2 Employee

    It's basically a "preponderance of the evidence" type of thing. You do sound like an employee to me. Relative to the expenses, those you should be able to write off on your 1040. Relative to the medical reimbursement and social security, do you mean you contract rate is higher than it otherwise would be to account for the fact that they are not withholding social security taxes or providing medical benefits as they would for an employee?

    If the amount was paid was over $600, the company is required to issue a 1099-MISC.

    The state involved is irrelevant. I'm guessing one of the reasons the company doesn't want to treat you as employee is because they don't want the tax issues and other exposure involved in registering as an employer in NY. However, too bad.

    You do know that, as an IC, you are responsible for both portions of Social Security and Medicare taxes, you will not be eligible for unemployment benefits and you aren't covered by Work Comp, right?

  3. #3
    Join Date
    Feb 2011
    Posts
    4

    Default Re: When Does a 1099 Contractor Have to Change to a W-2 Employee

    Quote Quoting PattyPA
    View Post
    It's basically a "preponderance of the evidence" type of thing. You do sound like an employee to me. Relative to the expenses, those you should be able to write off on your 1040. Relative to the medical reimbursement and social security, do you mean you contract rate is higher than it otherwise would be to account for the fact that they are not withholding social security taxes or providing medical benefits as they would for an employee?

    If the amount was paid was over $600, the company is required to issue a 1099-MISC.

    The state involved is irrelevant. I'm guessing one of the reasons the company doesn't want to treat you as employee is because they don't want the tax issues and other exposure involved in registering as an employer in NY. However, too bad.

    You do know that, as an IC, you are responsible for both portions of Social Security and Medicare taxes, you will not be eligible for unemployment benefits and you aren't covered by Work Comp, right?
    Thanks so much, that's really helpful. I did know about the worker's comp, didn't know about the medicare and unemployment. Basically, I get paid every month a base amount, commission (10% of sales), partial social security (between $200-$300), an expense account ($600) and the medical disbursement ($387), so essentially I get one check every month with an invoice which lists all of the disbursements in an itemized column with the total being the amount on the check. Also, I'm applying for a mortgage and concerned that I don't have an actual 1099 form to submit to the underwriters. It's feeling a little messy...thanks for taking the time to help with this.

  4. #4
    Join Date
    Jan 2006
    Posts
    27,830

    Default Re: When Does a 1099 Contractor Have to Change to a W-2 Employee

    Quote Quoting sparrow
    View Post
    partial social security (between $200-$300),.
    the employer is paying something to you that he lists as social security?

    It sounds like the guy knows you are an employee but is trying to give you the extra money that he is supposed to be paying into SS so you do not have to foot the entire SS payment.

  5. #5
    Join Date
    Feb 2011
    Posts
    4

    Default Re: When Does a 1099 Contractor Have to Change to a W-2 Employee

    Yes, essentially he is attempting to pay part of the social security but is just giving me the money

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