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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 3375
Experience:  Over 20 Years experience
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My employer has been giving me a w2 form and a 1099 form for

Resolved Question:

My employer has been giving me a w2 form and a 1099 form for the past 9 years. It has been brought to my attention that they are not suppose to do this. The reason I get a 1099 form is because I do cold calling to generate appointments for our sales reps. For every appointment the company pays me $25 dollars. For every sale that stems from that appointment I get 1/2 of 1 percent commision which is deducted from the sales reps total commision. I have no write offs because my company takes the write off for all expenses used for my work. This year my expenses are through the roof since I can no longer claim my son. I owe like $6 grand. for the last 9 years I have mostly broke even or paid $600 to $1500. But this year is out of control and made me start talking to people. Is what their doing legit? If not what can I do?
Submitted: 5 years ago.
Category: Tax
Expert:  R. Klein, EA replied 5 years ago.

Randalltax :

You are correct that you should not get a 1099 and W-2 from the same company. Commissions are wages, not separate payments

Randalltax :

Basically the 1099 forces you to pay both the employer's and the employee's share of the SS and Medicare tax. This means you are fooring the bill for a little over 7.5% of the wages that your employer should be paying

Randalltax :

On top of that, yo have no withholdings, som as you found out, you get zapped at year's end

Randalltax :

You can report this incorrect wage treatment to the IRS and get a determination letter by sending them Form SS-8. THe IRS opens an investigation to determine if you are treated correctly or not

Randalltax :

What are they giving the W-2 for? what about the 1099? They just split your commissions randomly between the two?

Customer:

If I do this I am also putting my job at risk and risk of bad treatment from my employers and managers . Is there any way to recoup the money that I should have received back had I not been 1099? Is my email getting a record of our conversation so I can print it out for future reference?

Randalltax :

The IRS does not tell the employer who sent in the SS-8 form. That's confidential

Randalltax :

You can flag this conversation and come back any time

Customer:

No the w2 is for my hourly wages. I do basic office work along with the cold calling. They separate my income into two catagories, hence the w2 and 1099.

Customer:

how do I flag the conversation. I am at work hard to talk til later.

Randalltax :

It's linked to your account when you sign in

Randalltax :

I don't know specifically how to flag it within your account since I do not have access to that part of the system.

Customer:

Did you receive my answer to your question on why they are giving me a W2?

Randalltax :

I see it. But as stated before, it should all be W-2 ioncome.

Randalltax :

You are only one employee getting two kinds of comp. Not two employees and definitely NOT an independent contractor.

Customer:

ok, is there any way they could be justifing it as a "Spiff"?

Randalltax :

The IRS MAY give you relief if they can determine the company is responsible for their share of the S/E tax

Customer:

if the IRS does go after them clearly I will face repercussions here at work. How can I avoid that. I understand you say the ssr form is confidential. But at some point it will be reveiled that I am the person who has brought this out.

Randalltax :

Spiffs are not subject to S/E tax but must come from a manufacturer not related to your employer to count as a Spif

Customer:

Again, my worry is with repercussions here at work. Are there any safegards for that.

Randalltax :

eventually someone is going to turn him in. So if everyone hides their head in the sand, then this incorrect procedure will continue.

Randalltax :

But the IRS cannot, by law, indicate to the employer who sent in the form

Randalltax :

Of course, if you are the ONLY empoyee, it would be rather obvious

Customer:

Unfortunately, this is a small company and I am the only one being paid this way. He had to turn himself in before for not paying taxes on cash payments. He did it because a previous manager who left the company had already called the health department on him and he knew that was next. Most workers here are benefiting from his shady dealings finacially and have been here for 20 years. I mean if I could at least get unemployment while I look for a new job. But highly likely they will not fire me so they dont have to pay into the unemployment. They would just make my life here more miserable than it already is.

Randalltax :

That is a choice you have to make the call on.

Randalltax :

I have advised you on the options available.

Customer:

Yes. Thank you.

Customer:

Once I log out will they deduct the $34 for your service?

Randalltax :

You must press the Accept button. It is the only way I get credit for assisting you. Thanks so much!

Customer:

ok... thank you. Pressing accept now

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