1099-MISC Dispute?

Question

I was employed by a company for 5 years. I had recvd W2's for 4 years the last year after I had left the company they issues a 1099-MISC for all of my earnings. I contacted them and they are not willing to correct the problem. Does anyone know of how I would dispute this 1099 with the IRS directly and I am aware of the ss-8 but that is not really disputing a past 1099-MISC. Any advice ?

My checks show they did not pay me any different amount then when I was an employee but they do not show they with held taxes etc. They deposited my checks and I never rcvd pay stubs for the last year.

Answer 1

You were an employee for 4 years and then an independent contractor for year 5. This may or may not be proper. Sometimes employees change over to consultants, so it is possible that you were not an employee for year 5.

As an employee you received fringe benefits such as health insurance and retirement plans that were terminated in Year 5. If the company terminated your fringe benefits, did not withhold federal or state income taxes, SS or Medicare taxes, the company may be able to establish that in the last months with the company, you were functioning as an independent contractor.


You have two options:

1. If you agree that you were functioning as an independent contractor, file your taxes as self-employed and take all your expenses of generating your income. Use Schedule C for this purpose. You will pay double SS and Medicare taxes, but only on the net income after you deduct all expenses.

2. If you do not agree that you were an independent contractor, but that you were an employee, do the following attachment to a paper return and mail it in:

Include the amount on the 1099MISC as wages on your Form 1040.

Fill out Form 4157. Cross out the words "Tip Income" and substitute the word "Wages". Do not fill in the lines associated with tips.

Line 9: fill in the amount of SS tax you owe (6.2%)
Line 11: Fill in the amount of medicare you owe: (1.45%)


These amounts will need to be included by you on your tax return (Line 59 of Form 1040) since you did not pay them as an employee in Year 5.

You can attach a statement and your 1099MISC to your return indicating that you were converted improperly to an independent contractor after 4 years as an employee. The IRS will aggressively come after the employer for unpaid payroll taxes, after investigating the situation. As part of their investigation they may ask you to fill out more forms.

Under either option, you owe income taxes and payroll taxes that were not withheld from your pay. Your employer is not liable for these taxes. Your former employer is liable at most for unpaid employer payroll taxes (plus penalties imposed by the IRS).

Get your return filed immediately using either option to minimize penalties and interest.

Answer 2

Where did you get the idea that form SS-8 is not the right way to resolve this.

Form SS-8 IS ABSOLUTELY THE RIGHT WAY TO RESOLVE THIS if the facts are as stated. IRS will not acept your treatment of form 1099MISC any other way. You will get a nastygram & you'll end up doing it right then

Form SS-8 asks IRS to determine whether you are an employee(W-2) or independent contractor (1099MISC).
You get to state your case, and IRS will ask the employer to respond. If IRS determines you to be an employee then you only pay your half of the socia security & medicare. Actually, yu can even request thatIRS make him pay your share of payroll taxes.

In any case, if you are on extension for 2006 file your return on time and amend after IRS makes the determination.

If for a prior year previously filed and the statute of limitations is approaching, include form 1040X with form SS-8. Write "Protective Claim" across the top,. fill in the first part and in the explanation Section write, " Pending IRS determination of employee status". Follow the same procedure with your state tax return.

Good luck!

Answer 3

Provided that you didn't make any arrangement to be a consultant with your employer for Year 5, your employer is in deep s h i t. First, contact the Labor department and file a compliant for improper reporting. Talk to someone at the Labor department. Then, write to the IRS and your state tax authority too and show them W2 from the first 4 years. File a compliant with both authorities that withholding taxes were not submitted on your behalf to them. Withholding employee taxes and not submitting to the IRS can be considered as fraud. When an employer withhold taxes from employees, the employer has the fiduciary duty to submit those taxes to the proper authorities. Those taxes actually belongs to you.

I'm sorry to hear that you're in this mess. I hate unscrupulous business owners.

Answer 4

Call the IRS and tell them you were an employee not a contractor. They have specific rules on who isn't allowed to be a contractor. If you have withholding taxes withheld you will need a W2 to get credit for them. If you have the check stub for your last paycheck it usually has your year to date taxes and income and you can use that if they refuse to issue a W2.
If they did make you a contractor and were allowed to you may have to file a schedule C and pay the self employment tax but you would know if nothing was withheld because you would have had a larger net check.

Answer 5

If your job didn't change, they can't just change you over to being paid as a contractor if your job was that of an employee.

Call the IRS and talk to them. It can take awhile to actually get through to a person, but can be done. Ask them how to proceed.

Answer 6

Contact a competent accountant .. they can help you!