employer switched everyone from W-2's to 1099's?

Question

I've been working at this place for 3 years.One day my direct deposit isn't there.Since then they have been paying everyone cash and told us this is the way it's gonna be from now on.What do I do? Also we have an IRA with this company and they have been taking money out of everyone's check but they have put nothing in the IRA acounts.Do they owe us only what they took out of our checks or do they also owe the amount they pledged to contribute from their end and what about the instrest that would have been gained had they put the money in when they were supposed to.Also now that basically all their employees are subcontractors do they need to carry workmans comp,what if I get hurt on the job???This is in Miami,Fl by the way and I know this is a lot to shove in one question but any help would be greatly appreciated...Thanx

Answer 1

I agree with the other answerers. This business is ready to fold, and they are desperate for cash. They do not want to, or do not have the cash, to pay the payroll taxes. They are withholding your retirement money and not investing it.

Get another job immediately. Until you do, keep records of your hours worked and payments received. Contact the Department of Labor for your state. Your employer has misclassified you. You will not have to pay the employer's SS and medicare, only your part. Your employer is required to participate in worker's comp and the state unemployment insurance on your behalf.

As for your retirement money, you can get a copy of the plan from the plan administrator. If your employer is keeping your money and not depositing it, I would call the US Department of Labor hotline [phone].

I would be worried that this employer may in fact be taking money out of your retirement accounts, check with your plan administrator and raise hell if you see this happening (DOL hotline number above).

Answer 2

I would call both the IRS and the Department of Labor and report this.

They can't just decide to pay you on a 1099. There are very specific rules on whether you are an employee or not, and it depends on your job duties and how much control the company has over your work rules. This is the part the IRS would be involved with.

As to the IRA contributions (is it an IRA or a 401K?), they might be within their rights to discontinue their match, but deducting money from your checks and then not depositing it is definitely not allowed - both the IRS and the DOL might be interested in this part.

It sounds like a company on very shaky grounds, maybe about to go under. I'd look for another job.

Answer 3

It's almost certain that your "employer" is breaking the law. Assuming that he still directs when you will work, how you will do your jobs, and provides the facilities for you to do your jobs there's little question that you are employees and NOT independent contractors.

I would suggest that you get as many folks together as possible and download Form SS-8 from the IRS website. Here's a link: http://www.irs.gov/pub/irs-pdf/fss8.pdf

Each of you -- the more the better -- should file these as quickly as possible. The IRS will investigate the matter and render a decision as to whether you are employees or independent contractors. In most cases this will go in your favor, especially since your employer just switched gears on this.

Once the IRS has laid down the law with your employer you'll be back on board as employees and the employer will be hit for any payroll taxes and withholdings that he did not pay in to the IRS.

Answer 4

You need to call the state labor board. I am pretty certain that they have done several things that are illegal.

Basically you were all fired and made self employed, without the benefit of filling for unemployement. They are also no longer paying their taxes as employeers, as you don't really work for them. They can't do this at all if you report to a place of work, and it is questionable if you work from home. If you are salaried you have to be an employee.

They are presently not paying workmans comp or unemployment insurance, your IRA, nothing at all.

They committed many no-no's with this little trick to try and save money. They owe you more then you posted here, they need to acknowledge that you have a real job.

Answer 5

You need to contact your state labor commission for advise. If you work only for that one company, and they tell you where to go, what to do and how to do it, it is most likely illegal for them to treat you as a subcontractor rather than an employee.
If they are still taking IRA deductions from your paychecks but not depositing them into your account, they owe you an explanation of what is being done with your money. They are most likely violating state and federal tax laws because your withholding amounts are being put at risk.
Personally, while investigating all of this, I would also be looking for another job. Obviously if this company made all these changes without letting their employees know what was going on, they don't care about their employees (subcontractors).

Answer 6

If they are paying you in cash something very strange is going on. There is no way of telling what, but I would be very concerned.

As for your IRA accounts, ask your employer if they are going to make their matching contributions for the amounts you contributed. If they say no, consult an attorney.

Finally, workers compensation is based on state law, whether they need to cover their employees is based on the state's definition of an employer, not by how they classify themselves. Also, it may not be in the employer's best interest to try to get out of workers' compensation because it could open themselves up to tort liability from their employees. Again, these questions are best left to an attorney in Florida.

Answer 7

You are all now self employed. This means that you are liable for all taxes including Federal, State, local and Social Security. And insurance both Workers compensation and health.

As far as your IRA accounts, if you have the agreement in writing? You need to contact a labor lawyer or your State labor board.

Your employer is putting it to all of you. You need to join together and go to your State labor board and complain.

Answer 8

Sounds like they may be in financial trouble. It may be time to look for a new job.

If your job hasn't changed and you still work at their direction on their premises, they can not change you to a 1099....period. You can file a form W8 with the IRS and have them make a determination of your status. You will probably be fired for doing so.

Personally......I would just go get a new job.

Answer 9

you can sign yourself up with a leasing co. as an employee. this is prob. the only way your gonna get workers comp. and get yourself some liability ins. you will have to have comp. because your in construction. fla. will screw you hard. basically you become your own employee. they will take care of all the taxes and w-2's. it sounds to me your boss got caught without workers comp. or lost his insurance or at the very least owes the payroll co. alot of money he never paid..