Correcting Tax Returns Due to a Past Misclassification as an Independent Contractor

[MrUnknown]

While working in the 2012 year, I was given a 1099-MISC with no withholding, just box 7 and nothing else. Being new, I figured this was normal and paid my dues. This year, for the 2013 year I was working on a W-4, and given a W-2 with withholding. When having my taxes filed (by the same preparer as last year), they questioned what had changed and my answer was nothing (I work the same scheduled 40 hours, at his business, same tasks, he provides all tools/etc, pays by hour as normal, etc...). This is when I was told I was being misclassified last year, and from my understanding a lot of employers do this to save money from having to withhold and pay taxes.

The problem lies with what am I to do now? Contacting the IRS is impossible, especially right now and I get mixed answers because at times their seems to be a language or communication barrier. I attempted to question a local CPA and was instructed I would need to contact the IRS for correct forms as he did not know exactly, and also to contact the CA Dept. of Unemployment and CA Franchise Tax board. I'm confused beyond belief...

Any help would help greatly, and would be greatly appreciated!

Thank you in advance,
MrUnknown (for privacy, of course...)

P.S. The employer is a sole-propietary, hires mainly family and close friends. The situation I'm in is the same for them, in excess of 5+ years than myself (which is very sad).

[jk]

there is not necessarily a problem here although more than likely there is.

a 1099 employee (independent contractor) can be treated as an employee but a person that qualifies as an employee cannot be treated as an IC. So, what you have to do is determine if you could actually be treated as an IC. If you could, then all they did was convert you to being an employee. No big deal and no problems.


If you were improperly classified as an IC, then you file an SS 8 with the IRS and go from there. Once you file an ss 8, the IRS will make a determination as to whether you could be considered an IC or not.


but why is contacting the IRS impossible right now. They are there all year long.

[llworking]

there is not necessarily a problem here although more than likely there is.

a 1099 employee (independent contractor) can be treated as an employee but a person that qualifies as an employee cannot be treated as an IC. So, what you have to do is determine if you could actually be treated as an IC. If you could, then all they did was convert you to being an employee. No big deal and no problems.


If you were improperly classified as an IC, then you file an SS 8 with the IRS and go from there. Once you file an ss 8, the IRS will make a determination as to whether you could be considered an IC or not.


but why is contacting the IRS impossible right now. They are there all year long.

I pretty much agree with this with the exception that there is no such thing as a 1099 employee. Someone is either an employee or they are an independent contractor...period.

[MrUnknown]

there is not necessarily a problem here although more than likely there is.

a 1099 employee (independent contractor) can be treated as an employee but a person that qualifies as an employee cannot be treated as an IC. So, what you have to do is determine if you could actually be treated as an IC. If you could, then all they did was convert you to being an employee. No big deal and no problems.


If you were improperly classified as an IC, then you file an SS 8 with the IRS and go from there. Once you file an ss 8, the IRS will make a determination as to whether you could be considered an IC or not.


but why is contacting the IRS impossible right now. They are there all year long.

I think the biggest problem for me is that I am out thousands of dollars, unknowingly, and the employer took advantage of this. Not only of myself but the state of CA, the Federal Government, and possibly much more. I've looked over the SS-8, but since it's showing for the 2013 year and not the 2012; do I get the 2012 year form and fill that out being it's gone and past? Or fill out the current to just find out that I'm currently being classified as a employee and get the classification verified by the IRS? It seems in the latter it'd be irrelevant. I'd need them to know the year prior.

The IRS right now will throw me from one department to another because each representative feel's that it's different such as.. Intake Rep > W2 Dept. > Fraud > General > Disconnect. The wait times in most cases can exceed an hour easily, very hard when working the same hours they are open.

I've looked over a couple 1099 vs. Employee examples on different sites, including the IRS' official; I'm 10/10 in employee status in each one and should have been classified as one from the start.

[Bubba Jimmy]

An experienced tax professional can sort this out for you. Seek help in completing the SS-8. Do not depend on telephone help from IRS. That is a useless and wasteful exercise right now. They are an agency in crisis. If you don't want to seek help, go to www.irs.gov and download the form SS-8. The most current version has a revision date in 2011. They do not update this form annually as they do the 1040 and other forms.

In all likelihood you were an employee and not independent.

[jk]

I pretty much agree with this with the exception that there is no such thing as a 1099 employee. Someone is either an employee or they are an independent contractor...period.

It's an attempt to use terms the general populace understands. Most of them, as far as they are concerned, even in an IC relationship, they guy that hands them money for work performed is their employer and they the employee.

[llworking]

It's an attempt to use terms the general populace understands. Most of them, as far as they are concerned, even in an IC relationship, they guy that hands them money for work performed is their employer and they the employee.

And that is the very reason why most people who are misclassified as Independent Contractors don't understand that they are being misclassified...that their employer is actually doing something illegal.

If people who know better never use the term 1099 employee and instead emphasize to people that they are not employees if they are paid as an independent contractor, it might actually help get the word out so that people don't accept being treated as a contractor when they are not.

[jk]

And that is the very reason why most people who are misclassified as Independent Contractors don't understand that they are being misclassified...that their employer is actually doing something illegal.

If people who know better never use the term 1099 employee and instead emphasize to people that they are not employees if they are paid as an independent contractor, it might actually help get the word out so that people don't accept being treated as a contractor when they are not.

most IC's do not realize they are technically self employed so they see themselves as an employee, even if they also accept the term IC. IC is also cumbersome when speaking so employee gets used as a generic reference to anybody that receives pay in an employee employee type of association, even where IC should be used.

it's not just a matter of using the correct term. Communication is interacting with another person in a manner which they understand. While I see nothing wrong with attempting to educate them to the proper terminology, if you just jump in and do not explain the difference, there is a possibility they simply will not understand what you are trying to say.


In this specific thread, the OP obviously saw the contractor come employer as an employer from the beginning. Also note that I did consider the correct term in my response:

a 1099 employee (independent contractor) can be treated as an employee

so, in that one phrase I noted that a 1099 employee is an independent contractor but furthermore, reinforced that by saying they could be treated as an employee. Now think about it; does saying an employee can be treated as an employee make any sense? I was obviously differentiating between an IC and an employee.

simply put; if I call a ladybird beetle a bug (or commonly known as a ladybug in my area of the country), people will know what I am talking about, even though a ladybird beetle is not actually a true bug. If I call it a coccinellidae (XX) and make a point it is not in fact a member of the order hemiptera , they just aren't going to care.


and in the broader sense, even an IC is an employee since the main contractor does employ them to perform work.