Conversion from Independent Contractor to Employee, and Form 8819

[MrTwo]

What is the name of your state (only U.S. law)? TX

From September 1997 through April 2010 I worked under an Independent Contractor agreement for one company, making quarterly estimated tax payments and filing form SE with my tax return.

In 2008, the company was fined for a prior year because of this arrangement, with myself and one other contractor named. In 2009, they were fined for a different year because of over 100 Independent Contractors whom the IRS claimed should be employees. In the process of their making this determination, all were required to fill out the form for the "20 factor test".

As a result of the fines, in April of 2010, the company made job offers and hired over 100 of us.

I am considering filling out a Form 8819 to have the company reimburse me for the employer portion of my Social Security tax in the years that I was misclassified. Normally, an SS-8 must be filed first, but in this case the IRS has already determined (as part of the IRS Misclassification Initiative) that I should have been an employee.

Does anyone have experience with a case like this? Will an SS-8 still need to be filed? Seeing that the determination has already been made, will the company have to go through a long process again? And what is the risk of my being seen as ill-willed? (In other words, will the hassle be worth the $7500 or so?)

Thanks,
Paul

 

[FlyingRon]

You'd have more luck with a Form 8919.

If you have a letter from the IRS that states you were an employee you can go direct to this form 8919. This form has nothing to do with you getting reimbursed by the company. It is for you to declare you do not owe their share on your tax form and you aren't paying it.

For last year, it will be a non-brainer.

For previous years I suspect you'll have to file an amended return.

If the company is paying you directly to cover what you paid in taxes, you better talk to a tax advisor (unless one of our resident experts has a bettr idea).

 

[pattytx]

I can say that, if the employer pays you what you owe in taxes, that is reportable on the W-2 and subject to tax withholding in the year that it is paid.

 

[MrTwo]

Oops! Yes, 8919.

Thanks for the replies.

Well, I do not have a letter, because I did not personally go through the process to get the IRS to declare that I should have been an employee. (The IRS has been on the warpath to get this done for the last few years.)

I'm not sure what you mean about them paying me directly to cover what I paid in taxes. The pay under the contract was about 20% higher than the salary after I became an employee, so in that sense it covered the taxes, health insurance, etc.

 

[LdiJ]

Oops! Yes, 8919.

Thanks for the replies.

Well, I do not have a letter, because I did not personally go through the process to get the IRS to declare that I should have been an employee. (The IRS has been on the warpath to get this done for the last few years.)

I'm not sure what you mean about them paying me directly to cover what I paid in taxes. The pay under the contract was about 20% higher than the salary after I became an employee, so in that sense it covered the taxes, health insurance, etc.

In that case, if you want to keep the job, you might not want to rock the boat.