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1099 vs W2 - is this a legal settlement?

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dublin

Junior Member
What is the name of your state (only U.S. law)? NJ

Hi,

My employer is trying to 1099 me for what should be W-2 income. I've done the research and discovered that I can file SS-8 and 8919 to deal with this. However, when I informed my employer of this, he offered to just write me a check for his half of FICA and then I'll just pay as if the 1099 was correct in the first place. Is that a legal move? Honestly, while I'm pretty annoyed that my employer messed this up in the first place, I have no desire to get him in trouble with the IRS so if there's nothing wrong I'd be happy to go with this arrangement.

I've looked everywhere and can't seem to figure out whether or not this is ok - I would think it's just as legit as settling a case out of court, but I want to make sure before I do it that it's not obstruction of justice or bribery or anything - I come out financially exactly the same either way, but it does save my employer from having to pay penalties and interest to the IRS.

Thanks so much in advance.

Dublin
 


davew128

Senior Member
No it's NOT legal, which is why you're not finding that answer. It's not a matter of a "legal settlement". It's a matter of law, which you and your employer can't circumvent out of convenience. As for the monetary aspect being taken care of with the IRS, I'm sure the NJ authorities would be happy to know that worker's compensation and unemployment taxes are being paid for your employment. Oh wait, they're not being paid.....:rolleyes:
 

dublin

Junior Member
No it's NOT legal, which is why you're not finding that answer. It's not a matter of a "legal settlement". It's a matter of law, which you and your employer can't circumvent out of convenience. As for the monetary aspect being taken care of with the IRS, I'm sure the NJ authorities would be happy to know that worker's compensation and unemployment taxes are being paid for your employment. Oh wait, they're not being paid.....:rolleyes:
Hi,

Thanks for the quick reply, I really appreciate it.

Honestly though, what I'm asking here is am I, the employee, responsible to report anything? I've made it very clear to my employee by now that he's wrong and that I'm an employee, and I'm very frustrated with it at this point, so all I want to know is will I be personally responsible if I don't report his mistake?

I fully intend to pay my share of Social Security and Medicare taxes either way, so this is of no monetary concern to me. It would just be a lot simpler from my perspective if I didn't have to go through the process of SS-8/8919. I don't care very much if my employer is putting himself at risk by not paying unemployment/worker's comp - if he wants to run the risk of getting in trouble, that's his issue. I just want to be cleanly and legally finished with this from my end, with my half of FICA paid, nothing more and nothing less.

Thanks again,

Dublin
 

tranquility

Senior Member
Other than the fact you wouldn't be covered under unemployment, any state disability laws and the fact your city/county may come after you asking why you haven't purchased a license to do business it's probably not that big a deal--as long as we ignore the conspiracy to commit tax fraud issue.

But, other than those things, it's not going to make a difference until you file your schedule C for that year and sign on the line under penalty of perjury the return is, to the best of your knowledge and belief they are true, correct and complete. Then you can have direct liabilty for the felony rather than a simple accomplice liability.
 

dublin

Junior Member
Re:

Other than the fact you wouldn't be covered under unemployment, any state disability laws and the fact your city/county may come after you asking why you haven't purchased a license to do business it's probably not that big a deal--as long as we ignore the conspiracy to commit tax fraud issue.

But, other than those things, it's not going to make a difference until you file your schedule C for that year and sign on the line under penalty of perjury the return is, to the best of your knowledge and belief they are true, correct and complete. Then you can have direct liabilty for the felony rather than a simple accomplice liability.
First of all, thanks for replying.

A few things:

a) I haven't worked for that employer since August, so unemployment and disability don't really make a difference for me here.

b) As far as I know, you don't need a city/county license to legally have independent contractor income.

c) Why the aggressive tone? I'm not trying to illegally obtain anything here, I just wanted to know if I could avoid the unpleasant experience of reporting my former boss to the IRS. I gain nothing other than that under any scenario - I'm still paying the same amount of FICA, and I would (hypothetically) even have him subtract from the check any income tax deduction I would get from SE tax. I seek to gain absolutely nothing here.

d) The tax fraud issue - that is the meat of what I was getting at. I know it is the employer's responsibility to correctly classify employees and report wages paid to them. On what basis would I, the 'victim' employee, be liable?

Thanks,

Dublin
 

tranquility

Senior Member
The aggressive tone is because you know this is wrong and you're just trying to find some justification as to why only the employer is doing the one in the wrong. But, the end result is that you will be committing at least two felonies. Will the powers that be care? Probably not. They won't catch it in the first place, and won't prosecute it in the second--probably.

But, the taxpayers are out a little because of your cheat. Remember that character is how you act when others aren't watching. You are displaying your character here. Since I'm not that impressed, I'm not even going to go the logical error where you describe how doing this benefits you and then, in the same paragraph say how you gain absolutely nothing here.
 

davew128

Senior Member
Is there anyone here who can both read and write that might be able to answer my question?
It was answered in my first reply. Nothing else is relevant, and no the state agencies don't care if you're no longer working there as I can attest to having defended a payroll audit before. A handshake deal with your former employer makes it worse for YOU than it does for HIM. What part of that was unclear to you?
 

dublin

Junior Member
Dave,

I apologize; my remark was not aimed at you. Your response was helpful, and what you're saying makes sense - I understand that the government was cheated out of unemployment and workers' compensation. However, what I was hoping you could tell me was:

Under what law would I, as opposed to my employer, be liable?

It would be helpful if I could explain this specific law to my employer so that he might cooperate legally.

Thanks, and have a nice weekend,

Dublin
 

davew128

Senior Member
You could theoretically be responsible under whatever laws NJ has for responsible person with regards to failure to pay their payroll taxes for WC and SUTA. Many states also have criminal penalties on the books now for misclassification of employees. Does that affect you? No probably not unless they can consider you to be a responsible person for this. Note I said A responsible person, not THE responsible person. It's unlikely you would ever suffer any adverse effects but the employer would be the one on the hook.
 

LdiJ

Senior Member
You could theoretically be responsible under whatever laws NJ has for responsible person with regards to failure to pay their payroll taxes for WC and SUTA. Many states also have criminal penalties on the books now for misclassification of employees. Does that affect you? No probably not unless they can consider you to be a responsible person for this. Note I said A responsible person, not THE responsible person. It's unlikely you would ever suffer any adverse effects but the employer would be the one on the hook.
I will also add that if you don't go the SS8 and 8919 route, then you just allow this employer to keep doing it to other employees, many of which won't be in the position to fight this employer. You are, because you do not work there any longer.
 

dublin

Junior Member
Thanks for all the explanations.

I finally spoke to my former employer yesterday, and it looks like after all of that I'm in fact getting the 1099 and not the check. What am I supposed to do with the 8919/SS-8? I'm about 95% sure that I'm right about my employee status, but is there a way I can avoid the risk of underpayment if I'm wrong? Can I somehow pay the full SE tax when I file my taxes and then get a refund of half of it if/when the IRS determines that I'm correct?

Dublin
 

njauth

Junior Member
3rd Times a charm!

We already have two complaints from psuedo-employees of the company in question. Everything here you have said is so far hearsay. I am sure if he thinks he made an error in fact he will contact a tax attorney/accountant immediately and resolve these issues. Fair Warning!!! I just hope he sees this message board.
 

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