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what if someone wants to work as a W2 employee and

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then change status to a...
what if someone wants to work as a W2 employee and then change status to a 1099 in the same year though an LLC, is that forbidden by the IRS?
Submitted: 9 years ago.Category: Tax
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5/2/2008
Tax Professional: Cassandra, Tax Preparer replied 9 years ago
Cassandra
Cassandra, Tax Preparer
Category: Tax
Satisfied Customers: 306
Experience: 8yrs experience in taxation for individuals. CTEC Registered and an Authorized E-filer with the IRS
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HelloCustomerand welcome to just answer.

This is not forbidden by the IRS, as long as the work done as a 1099 is justified as a self employed individual. Some companie actually employ the same person as both a 1099 and a W-2, and the work between the two jobs are different. The scope of the work must fall within the rules and regulations of a self employed individual, in order for the company to legally classify you under a 1099.

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Customer reply replied 9 years ago
Reply to Cassandra's Post: I should have been more clear. I think the Phrase I am looking for is corp-to-corp. There is an individual who is on a project for our company now as a w-2 hourly paid consultant. She wants to now swith her status to corp-to-corp. She is an LLC and would need to incorporate herself because we do not take the tax risk fo working with 1099s or LLCs, as a company, we do not to pay their taxes. However, it is my understanding that is someone switches from W-2 to Corp to Corp in the same year, that sets us and them up for audit risk by the IRS...yes?
Tax Professional: Cassandra, Tax Preparer replied 9 years ago

It is a possiblity that this may red flag her for an audit, but the reality is that this is justifiable and would be easily proved if she was called for an audit Even if this does bring in a red flag, it does not neccessarily mean she would be called in for an audit. In fact this type of audit may be one that is conducted by mail or phone, as it would only need to be proved on the scope of the business.

Since, she is considering become a Incorporating her business, then you are not even required to 1099 her corporation. The expenses and Income between the two of you would be proved in your billings between each other. Corporations are not required to 1099 other corporations.

Cassandra
Cassandra, Tax Preparer
Category: Tax
Satisfied Customers: 306
Experience: 8yrs experience in taxation for individuals. CTEC Registered and an Authorized E-filer with the IRS
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