California Employment Law
California Employment Law Questions Answered by Legal Experts
this is regarding New York state Unemployment: I have a question about Unemployment Insurance:I was recently fired, and i was paid on a 1099 for "freelance" work, however according to the definition of employee, I would be considered an employee and eligible for UI benefits. I have filed my taxes for 2011 as an independent contractor, and taken deductions on my sch. C. My questions are, 1. if my boss contests the UI filing, is there an automatic review of my employment status, and 2. is there a hearing for that, and 3 if I am judged to be an employee does my boss then have to re-file his reporting and report me on a W2?, and 4, do I then have to re-file my taxes based on being a full time employee instead of an independent contractor? I am trying to figure out the process and weigh if it is worth going through it to get unemployment benefits. thanks for your help, i have not been able to find anyone who can answer these questions.
Hello and thank you for your question today.
Are you online with me?
Welcome to the chat.
I am now.
Have you already made a claim for benefits?
yes, based on 1099 as independent contractor.
So you specifically stated that you were a 1099 correct?
So here is the problem with unemployment. You have to actually allege that you are an employee in order to be considered one under the law for an investigation to take place.
They will not go above and beyond doing an investigation without additional facts.
I understand. Please read my email describing what I am trying to get answers to.
My questions are, 1. if my boss contests the UI filing, is there an automatic review of my employment status, and 2. is there a hearing for that, and 3 if I am judged to be an employee does my boss then have to re-file his reporting and report me on a W2?, and 4, do I then have to re-file my taxes based on being a full time employee instead of an independent contractor?
Was there additional information not posted?
Because, in answer to 1. if you claim that you were in fact an employee when you applied, then there would be an automatic review of your employment status.
If you did not, then there would not be
Ok, so then there is a review. If I am judged to be an employee, does my employer then have to re-report my income on a W2, and do I then have to refile my taxes as an employee?
thereby not being able to take the Sch. C deductions.
Okay so there are multiple issues here. There is the issue of the unemployment department, the issue of the IRS, and the issue of the misclasification of the employer.
When the unemployment department requalifies you they will make a decision based on your benefits. This information will then be shared with the IRS. Usually, you would then be required to file a formal complaint for unpaid wages with the department of labor to be paid for all unpaid taxes that your employer should have paid you
I dont understand why there are unpaid wages involved. you mean his share of taxes he should have been paying on my as his employee? And he would pay them to me instead of to the government offices he should have paid in the first place?
If you were audited, this information would be used to look at the deductions you made as a misclassififed independent contractor. In regards XXXXX XXXXX unpaid wages, it would depend on the exact situation, however, being misclassified not only results in significant fines to your employer, but may end up with additional money to you. In terms of who you would report this to, it would be to the IRS, the department of labor, or the department of revenue
As a misclassified employee you would be able to avoid paying any self employment tax and avoid paying your half of FICA tax as well
You may also be entitled to certain wage protections such as overtime.
So, are you saying if I am classified as an employee, I would then have to refile my taxes as an employee, and my boss would have to issue a W2 for my wages, and pay the proper taxes he is liable for?
Your boss would actually receive significant fines and be liable for unpaid taxes, workers compensation, social security, medicare, etc. They would also be required to pay yout any back pay or liquidated damages owed to you as a result of the misclasification
the reason for my questions is that I have been told by several people that applying for unemployment will not affect my taxes, and I am trying to confirm if that is correct. I am trying to weigh if it is worth it, if I loose about the same amount in increased taxes as I would receive in unemployment benefits, plus all the headache.
That is not correct if you are misqualified.
Well, I should clarify
if you do not get audited
but if you are audited then because you were re-qualified as an employee they would look at that in their determination of any back taxes owed
would the process trigger an audit?
in fact it is not very common
but I want to let you know of the possibility
so I would be taking a chance that the IRS would go back over previous years filings as an ind. contractor, and would reclassify me as an employee and in that even, I would have to refile my taxes for those years?
They could technically go over the last 3 years. To be safe, you would refile. To not be safe, you would wait to see if you were audited. In that event, there would likely not be the additional penalties assigned to this type of situation given the intricacies of it. However, you would have to repay the overpayment
Or I should say underpayment
But yes, that is correct
ok, i think I understand the big picture now. I don't want to end up in a big mess. At least now I have a better idea of the possible outcomes. I just want to be a little clearer on one point:
if my boss contests my eligibility, does that automatically trigger the re classification, and hence the possible outcomes?
So the way unemployment works is, 1) you make an argument that qualifies you for unemployment (you are granted unemployment) 2) your boss contests this for a legitimate reason (you are denied unemployment) 3) you are given the opportunity to appeal (usually over the phone first, then in an in person meeting, then in front of a judge) So, you have to actively state that you were an employee being paid as an independent contractor in order for the reclassification investigation to automatically trigger. Just making the claim for unemployment would not do this.
Does that make sense?
But you have to present the evidence showing that you are in fact an employee to get to this stage
Ok, yes, I guess that is what I was trying to determine. If he did not contest it (to avoid any investigation of his business practices and other 2 people he is paying the same way)--then I would not have to go through the reclassification process, and would be able to collect unemployment AND not have to redo my taxes?
Well not necessarily. If he is not paying unemployment taxes on you, then in order for them to grant you unemployment benefits, he has to get in trouble.
right. but at this point I dont care about him getting in trouble, I am concerned about how it affects me.
I understand, I am just stating that whether or not he contests it, if you make a valid argument as to why you are an employee and not an independent contractor then an investigation into his business would occur. If this occurs, then you would be reclassified as an employee, be able to collect unemployment and be left with the choice of whether or not you want to redo your taxes, however, if you choose not to redo them you are subject to audit and repayment.
This, however, is separate from any overtime or unpaid wages you may have through the department of labor.
So in terms of what you said "If he did not contest it (to avoid any investigation of his business practices and other 2 people he is paying the same way)--then I would not have to go through the reclassification process (no you would have to be reclassified to receive benefits), and would be able to collect unemployment (yes you would receive benefits) AND not have to redo my taxes? (no, you would be liable for unpaid taxes-however, the likelihood of being audited is slim)
OK, great now I get it. thanks a lot. at least I can make an informed decision about how to proceed.
I am glad I could get you pointed in the right direction. Please do not hesitate to leg me know if you have any additional questions or concerns and I will be more than happy to assist you further. If you do not require any further assistance, please do not forget to provide a rating in the middle or above as this is the only way I will receive credit for assisting you today.
let me know. Sorry for the mispelling
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