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My wife was working full time but being paid as a 1099 instead of W-2
- Thread starter Dynamo2000
- Start date
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As a tax professional I don't this getting better OR worse. It is what it is, and the issue of classification tends to be more problematic in certain types of industries. I recall a client 15 years ago who's c corp was put out of business for payroll tax by the IRS (which I saved him from personally with an OIC) and classification issues. Within 5 years he's got a new LLC in the same type of business and wham, the MA DOR comes in with a payroll tax audit. I start reviewing his books and he's doing the same thing, paying people with cash and/or 1099ing them for what was obviously employee type work (operating a parking lot sweeper). The idea that businesses DON'T know what they're doing is BS.
eerelations
Senior Member
In my experience it seems to be about 50-50. Just my experience though.
cbg
I'm a Northern Girl
So in your opinion, Dave, EVERY small business owner is completely fluent in ALL employment laws, knows each and every one from wage and hour to benefits to workers comp to discrimination and if they're doing anything wrong it is therefore being done wrong deliberately and maliciously? There are NO circumstances where they simply do not know what they're supposed to be doing and are doing it wrong because they don't know any better?
Now THAT's BS.
Now THAT's BS.
commentator
Senior Member
Incidentally I will definitely bow to ee on this aspect of employment law. We all have our areas of more and less experience.
If I may weigh in, my 2 cents worth, with a lot of time spent dealing with employers, I am willing to guess it's maybe 25% outright ignorance, and 75% percent "I knew it was shady but I thought I could get away with it." For some reason, these types of issues (misclassifying employees in the name of a little profit) is one of those things like cheating on unemployment benefits that otherwise very nice and outspokenly moral people will do. I don't claim to understand it, but I know many people go into small businesses woefully unaware of their tax liabilities, their responsibilities to employees and how they are supposed to do things.
I also know how in every state, our federal and state departments of labor spend extensive time and money and effort educating employers on the unpleasant realities of tax law, unemployment law, wage and hour, all these issues where fudging isn't legal, no matter how much you'd like it to be. This employer may or may not have been remiss in unemployment tax payments to the state, which is also illegal, and would come back to bite them in back taxes as soon as it gets reported anywhere if they are due. I would suggest that the state Wage and Hour department would be a good place for this employee to start talking.
In my line of work, we had a sort of unofficial perception that for some reason, medical, dental and veterinary offices seemed to be some of the chief offenders in issues of this type, like misclassification of employees. Instead of hiring a competent office manager, they'd try to cut corners. They'd hire their wife, their girlfriend, or their old buddy from college, and go into things wide open and cheating blatantly all the way. And in the meantime be presenting themselves as the most moral people you could dream of, not really considering this type of cheating as anything illegal or immoral.
Yes, in a way they didn't know better, but then if they'd taken the trouble to read all the material they'd been given as soon as they identified themselves as employers, or listened to what they'd been told by professional organizations, or their accountant, or taught in school they would have known better. They just didn't pay a lot of attention to doing it right because they know how they want to do it, how they'd like it to be. And when they're caught or challenged, they howl like mad about the unfairness of the system and the mistreatment of small businesses by our big horrible government.
This gentleman's wife really should have known better than to accept a job under these terms in the first place. She wasn't a contractor, both parties in this pretty much knew that, or could've found out without much trouble.
In employment issues, it is really important to be an "Army of one" and to be alert to any employer misreporting or misconduct. That said, I'd certainly try to work with the employer, talk to authorities about the situation and get this matter dealt with. I wouldn't work any more for them as a misclassified 1099.
If I may weigh in, my 2 cents worth, with a lot of time spent dealing with employers, I am willing to guess it's maybe 25% outright ignorance, and 75% percent "I knew it was shady but I thought I could get away with it." For some reason, these types of issues (misclassifying employees in the name of a little profit) is one of those things like cheating on unemployment benefits that otherwise very nice and outspokenly moral people will do. I don't claim to understand it, but I know many people go into small businesses woefully unaware of their tax liabilities, their responsibilities to employees and how they are supposed to do things.
I also know how in every state, our federal and state departments of labor spend extensive time and money and effort educating employers on the unpleasant realities of tax law, unemployment law, wage and hour, all these issues where fudging isn't legal, no matter how much you'd like it to be. This employer may or may not have been remiss in unemployment tax payments to the state, which is also illegal, and would come back to bite them in back taxes as soon as it gets reported anywhere if they are due. I would suggest that the state Wage and Hour department would be a good place for this employee to start talking.
In my line of work, we had a sort of unofficial perception that for some reason, medical, dental and veterinary offices seemed to be some of the chief offenders in issues of this type, like misclassification of employees. Instead of hiring a competent office manager, they'd try to cut corners. They'd hire their wife, their girlfriend, or their old buddy from college, and go into things wide open and cheating blatantly all the way. And in the meantime be presenting themselves as the most moral people you could dream of, not really considering this type of cheating as anything illegal or immoral.
Yes, in a way they didn't know better, but then if they'd taken the trouble to read all the material they'd been given as soon as they identified themselves as employers, or listened to what they'd been told by professional organizations, or their accountant, or taught in school they would have known better. They just didn't pay a lot of attention to doing it right because they know how they want to do it, how they'd like it to be. And when they're caught or challenged, they howl like mad about the unfairness of the system and the mistreatment of small businesses by our big horrible government.
This gentleman's wife really should have known better than to accept a job under these terms in the first place. She wasn't a contractor, both parties in this pretty much knew that, or could've found out without much trouble.
In employment issues, it is really important to be an "Army of one" and to be alert to any employer misreporting or misconduct. That said, I'd certainly try to work with the employer, talk to authorities about the situation and get this matter dealt with. I wouldn't work any more for them as a misclassified 1099.
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cbg
I'm a Northern Girl
Back when I was doing HR consulting, as a marketing tool to show small businesses why they needed my services, I had a little ten question quiz on employment law that I used to give employers. I used the questions that come up most often on these forums to devise the quiz.
Don't think a single employer I gave the quiz to got more than half right. The average score was three questions answered correctly.
Don't think a single employer I gave the quiz to got more than half right. The average score was three questions answered correctly.
eerelations
Senior Member
Don't tell me what my opinion is, you're not smart enough. Business owners DO know when they're breaking the more obvious laws. Business owners were in the field before they started the business. They know whats going on. Obviously they don't know all employment laws, but when it comes to things like how they pay their people, yes they sure do know what they're doing.
Dynamo2000
Junior Member
Firstly, I want to thank all of you for taking out time and responding to this important matter to myself and my wife. You already have helped out a great deal and yes, I will be pursuing the matter. Your feedback matters and DOES make a difference. I hate the infighting so please try to stay focused on the issue at hand and not the experience of the contributors.
There is one issue I asked about originally that was finally addressed by davew128 – criminal vs. civil offense. CBG you highlighted probably the key issue in this matter – knowingly. Here is where it gets really interesting (and I will explain why) and your combined expertise and feedback would be invaluable. I am not sure what you mean by “knowingly”. The doctor probably did not know (and would certainly state his ignorance) that it is illegal to misclassify a worker BUT he deliberately did so to avoid having to pay social security tax and other benefits my wife would have been entitled to. This is by no means the end of the “story” though. Here is where it really gets interesting. While the doctor may not have known about the illegality of misclassifying workers, he had (and still has) a CPA who handles his taxes. His CPA without question knew my wife was full time (although he may not have known about the overtime) and classified as a 1099. So now tell me, is it excusable that a CPA licensed in Massachusetts, practicing for years and years would not know that it is illegal to misclassify a worker this way? Assuming it is not excusable, we now have a classic case of the head not knowing or not wanting to know about illegal activities carried out by their subordinate. Can the doctor “get off the hook” by pointing his finger at his CPA and saying it was his responsibility (when he, the doctor probably did not want to know the truth)? Surly there must be case law pertaining to this type of a situation. Excuse me but I just cannot resist reminding you of how many times in the recent past a head of state or director has ducked responsibility by claiming ignorance if illegal activities of subordinates. Most recently Loretta Lynch former head of the IRS in trying to duck responsibility said she was only “generally aware” of the IRS targeting of conservative groups. The examples go on and on. But what about my case - Can the doctor “get off the hook” by pointing his finger at his CPA????? And then, how much responsibility does the CPA bear?
There is one issue I asked about originally that was finally addressed by davew128 – criminal vs. civil offense. CBG you highlighted probably the key issue in this matter – knowingly. Here is where it gets really interesting (and I will explain why) and your combined expertise and feedback would be invaluable. I am not sure what you mean by “knowingly”. The doctor probably did not know (and would certainly state his ignorance) that it is illegal to misclassify a worker BUT he deliberately did so to avoid having to pay social security tax and other benefits my wife would have been entitled to. This is by no means the end of the “story” though. Here is where it really gets interesting. While the doctor may not have known about the illegality of misclassifying workers, he had (and still has) a CPA who handles his taxes. His CPA without question knew my wife was full time (although he may not have known about the overtime) and classified as a 1099. So now tell me, is it excusable that a CPA licensed in Massachusetts, practicing for years and years would not know that it is illegal to misclassify a worker this way? Assuming it is not excusable, we now have a classic case of the head not knowing or not wanting to know about illegal activities carried out by their subordinate. Can the doctor “get off the hook” by pointing his finger at his CPA and saying it was his responsibility (when he, the doctor probably did not want to know the truth)? Surly there must be case law pertaining to this type of a situation. Excuse me but I just cannot resist reminding you of how many times in the recent past a head of state or director has ducked responsibility by claiming ignorance if illegal activities of subordinates. Most recently Loretta Lynch former head of the IRS in trying to duck responsibility said she was only “generally aware” of the IRS targeting of conservative groups. The examples go on and on. But what about my case - Can the doctor “get off the hook” by pointing his finger at his CPA????? And then, how much responsibility does the CPA bear?
But, commentator, where you come from, cheatin' the revenooers is the moral thing to do.
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commentator
Senior Member
A lot of my employers certainly thought so! And "don't tell me!" "I see nothing!" was their mantra to their tax people and advisors. As I said, they knew how they wanted it to be. That was all they thought they needed to hear.
Meantime, what should this misclassified person do from here on?
Meantime, what should this misclassified person do from here on?
cbg
I'm a Northern Girl
Since your opinion does not match up with my personal experience, I will continue to call your opinion BS.
cbg
I'm a Northern Girl
The misclassified employee should report to the appropriate regulatory agencies and let them sort it out. It is not her job, the poster's job, or our job to determine whether or not the doctor did or did not know he was breaking the law - it's their job.
eerelations
Senior Member
The key word here being "obvious" - minimum wage, laws, OT laws, UI laws are obvious. IC vs employee laws? Not so obvious.
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