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  1. #1

    Default Employee Being Paid As K1 Partner

    My question involves labor and employment law for the state of: NY

    My husband is working for a company and is definitely an employee. His schedule is set for him, etc. However, he gets paid weekly, and instead of getting a 1099 at the end of the year (which would still be a misclassification of what he is) he will get a K1, which from what I can find is for partners.

    I have no idea what they’re trying to pull in doing this, or what his recourse is, other than to quit, which isn’t exactly an option either.

    They’ve been doing this as common practice with all their employees for a long time as far as we have heard.

    So I guess I’m wondering- any idea why they’re doing this, what the negative impact on us may be, and what, if any recourse we have against them.

  2. #2
    Join Date
    Sep 2010
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    19,841

    Default Re: Employee Being Paid As K1 Partner

    How often he gets paid and whether he has a schedule set doesn't enter into the "is he a partner or employee" evaluation as it does for the "contrcxtor vs. employee" one.
    The question is his financial relationship to the partnership. If he is granted a capital share (more than 1%) or he gets paid as a precentage of the profits, then he can be a partner.
    What they're likely "getting at" is not having to pay all the employer stuff (their part of the FICA nor provide any benefits).

  3. #3
    Join Date
    Oct 2014
    Posts
    8,137

    Default Re: Employee Being Paid As K1 Partner

    Quote Quoting Littleraven33
    View Post
    My question involves labor and employment law for the state of: NY

    My husband is working for a company and is definitely an employee. His schedule is set for him, etc. However, he gets paid weekly, and instead of getting a 1099 at the end of the year (which would still be a misclassification of what he is) he will get a K1, which from what I can find is for partners.

    I have no idea what they’re trying to pull in doing this, or what his recourse is, other than to quit, which isn’t exactly an option either.

    They’ve been doing this as common practice with all their employees for a long time as far as we have heard.

    So I guess I’m wondering- any idea why they’re doing this, what the negative impact on us may be, and what, if any recourse we have against them.
    Look at the K-1. It will tell you what portion of the partnership income and capital your husband supposedly has. Look also at the name of the partnership — does it match the name of the company he's working for? And does it indicate a LLC, LLP, or LP, or is it supposedly a general partnership? If he owns a share of the partnership or is entitled to share in the profits/losses of the business then he may be a partner. If he is, then the K-1 is appropriate. Without the details of the business arrangement I have no way to know what the real reason is behind what they are doing, other than he's responsible for his own FICA taxes (Social Security and Medicare taxes) if he is a partner. If he were an employee then the employer pays half the FICA taxes for him.

  4. #4

    Default Re: Employee Being Paid As K1 Partner

    He doesn’t own anything. He’s straight up an employee 100%. He hasn’t gotten a K1 from them, so I don’t know if anything matches where he’s getting paid from.

    He has no financial relationship. He’s an employee being paid this way. No one really understand why but doesn’t believe it’s legal for certain.

    Quote Quoting flyingron
    View Post
    How often he gets paid and whether he has a schedule set doesn't enter into the "is he a partner or employee" evaluation as it does for the "contrcxtor vs. employee" one.
    The question is his financial relationship to the partnership. If he is granted a capital share (more than 1%) or he gets paid as a precentage of the profits, then he can be a partner.
    What they're likely "getting at" is not having to pay all the employer stuff (their part of the FICA nor provide any benefits).
    So he’s certainly misclassified as a contractor if he doesn’t get a W2, correct? He’s an employee per any definition as defined by the IRS. So that’s an issue.

    He’s never had a partnership discussion he was hired in March and they said “we pay you $900 a week and you’ll get a K1 in the spring”.

    What should we do?

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