Employee or independent contractor?

Ralph Havens – Director of Professional Services

Are you receiving a 1099-MISC when you should be getting a W-2?

Generally, employees receive Form W-2 from their employer. Independent contractors normally receive a Form 1099-MISC, and they must report the income on a Schedule C and pay Self-Employment Tax on the net profit using Schedule SE.

If you are being classified incorrectly, you may want to look into setting the record straight with the IRS by using its new Form 8919, Uncollected Social Security and Medicare Tax on Wages.

This form can be used if you are an employee, but are being classified as an independent contractor, and your employer did not withhold Social Security and Medicare taxes.

This is a good thing if you are the employee because you then get out of paying Self-Employment Taxes. And you can file Form 8919 with your tax return. You do need to send Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, to the IRS separately. You will then be subject to pay your share of the FICA and Social Security taxes.

If you are the employer, however, you are going to have to pay your share of FICA and Social Security taxes, and get fined for filing and paying late. You will also have to pay the Unemployment Tax and, again, get fined for filing and paying late.

Keep in mind, however, that even if you submit the forms to the IRS, it doesn’t mean the IRS is going to change your status. It also doesn’t mean your employer isn’t going to contest it. If that’s the case, you will have to file an amended return and pay the additional tax.

Ralph Havens was named the Director of Professional Services in June 2007 and has been with JK Harris since 2003. He heads up JK Harris’ Audit, Tax Preparation and E-File departments. Ralph has been an Enrolled Agent for 14 years and his special area of concentration is in audit representation.