posted
In 2007 I was interviewed and hired for a paid internship at a nonprofit. It was agreed that I would do so many hours of work for a $2000 compensation with a possible bonus. I was told to fill out and fax my W-4 to the main office out of state. They kept losing it and I had to refax it twice. My internship ended and I was given a good exit interview and given a letter of recommendation. I did not receive payment for my work in 2007. I had to enlist the help of my college department director (who helped me get the internship) to get them to pay me. I was finally paid in 2008. No taxes were taken out.
My husband and I filed our taxes without a form from that employer because they took forever to send it. I honestly assumed I would not be sent one (due to their previous incompetence). On what had to have been the last possible day to send one, they did. It is a 1099-MISC. I called H&R Block to do an amendment and they called me back to tell me it would be in the mail tomorrow. I asked if I would owe. They said yes and told me I would have to pay $750!
My question is why did they not take taxes out of the paycheck? Why was I paid like a contractor when I filled out a W-4 asking them to take out taxes? I was treated like an employee. I was told what to do and how to do it, just like any other employee. Was the nonprofit wrong in giving me a 1099-MISC and not a W-2? If they were, what can I do about it? By the way, I would ask my H&R Block people, but they don’t seem to know what they are doing and won’t give me a straight answer.
Thanks to anyone who can provide any information on this.
Posts: 2064 | Registered: Dec 2003
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posted
My brother had that problem one year. He just had to pay. Unfortunately, you still owe the tax, even if it should have been taken out initially. At least that was my understanding.
It sucks, I wish I had a better answer. I hope someone else does, but I think that ultimately, the taxes are your responsibility. Maybe there is something you can do to report the company in question so that they don't cause this problem for someone else in the future (though I don't know what that would be).
As for the H&R Block people, they don't have any way of knowing why your employer didn't take taxes as you requested on your W-4, all they can do is respond to the paperwork you give them, so don't be too hard on them.
Maybe KPC will have a better answer for you (at least regarding what you can do about the company not complying with the W-4).
Posts: 1214 | Registered: Aug 2005
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posted
I'm not trying to get out of paying the taxes, I am just wondering if they were in the wrong not sending me a W-2 and if so, would I pay less in that case.
Posts: 2064 | Registered: Dec 2003
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posted
I'll ask KPC to come attend to this thread. He hasn't had much time for HR lately and the kids and I are horribly sick, sorry it took so long. Posts: 21182 | Registered: Sep 2004
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quote:Originally posted by Valentine014: I'm not trying to get out of paying the taxes, I am just wondering if they were in the wrong not sending me a W-2 and if so, would I pay less in that case.
I doubt it, since you say that there was no tax taken out of your check. If they had taken tax out, it would probably make a difference, but since they didn't I doubt that it will.
That said, I'm not a tax expert, maybe KPC will have a better answer for you.
Posts: 1214 | Registered: Aug 2005
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posted
Yes, it would appear that you should have received a W-2 instead of a 1099-MISC from the company. To be classified as an independent contractor, the following guidelines would need to be met:
1. The company cannot tell you when you have to come into work or leave 2. You would need to use your own equipment/supplies 3. The company cannot reimburse you for any expenses.
Either the company does not know how to account for your pay or is trying to avoid paying payroll taxes. You can try to contact the company and find out why they issued it this way. At this point, they probably will not want to issue a W-2 due to the paperwork and penalties involved.
As for H&R Block, it sounds like they only reported the income and did not take any expenses out. By filing an amended return, it does increase your chance of an audit, but you need to because you are required to report this income. However, you should deduct all allowable expenses to offset this income and minimize your tax liability.
If you think that they are trying to avoid paying payroll taxes, you can visit your state's deparment of labor website for more information on reporting this violation.
Posts: 137 | Registered: May 2005
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posted
You are paying more taxes as an independent contractor than you would as an employee because you have to pay both halves of social security and medicare taxes. If they'd reported it as a W-2 the employer would have paid half.
But, as KPC said, they are not likely to want to change it now because then they'd have to pay those taxes plus penalties.
Posts: 9866 | Registered: Apr 2002
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posted
Were no taxes at all taken out? So the flat fee was $2000?
If that's the case, then yes, they paid you then like you were a contractor. They decided to make you pay all the payroll taxes on your own not when they issued a 1099 instead of a W-2, but when they gave you a flat check for $2000.
My guess is the W-4 you sent twice was never actually entered into the system and you were never on the rolls as an employee. When you pressed for payment, they treated you as an account payable instead of an employee. They weren't wrong in issuing a 1099 instead of a W-2, but instead were wrong in giving you a flat check for $2000 and not entering you as an employee. The 1099 is just the evidence what was (not) done earlier.
I'm sorry - that really sucks. I think you were set up from the beginning, though, and it didn't happen just now at the end.
Posts: 26077 | Registered: Mar 2000
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posted
Paying her as a 1099 probably was wrong. Companies are required to pay employees meeting certain conditions as regular employees and not as contractors, and from her description she probably meets those requirements. If that's the case, the company paying her like a contractor would be legally incorrect.
Posts: 15770 | Registered: Dec 2001
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posted
Yep, I agree with that. I've worked as a contractor and as an employee before, as a student, and the experiences were very different. And in all experiences, which kind I was was clear from the beginning. This sounds like they told her one thing and treated her like another.
I suspect initial incompetence, however, instead of malice (a total failure to get her in the system at the beginning) and everything that happened since has been CYA. Which I bet they'll get away with, unless the Labor Department has some recourse.
Posts: 26077 | Registered: Mar 2000
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posted
It isn't the labor department that really gets miffed, it is the IRS.
Valentine: fill out and submit this form, it will trigger a review of your status, and if the company turns out to have been in the wrong, that'll mean they'll have had to cover at least the part of taxes they would have had to cover legally.
posted
I want to stress that while you're filing complaints, you still need to pay the taxes (less your allowable expenses-- tell H&R Block you want to submit expenses as well. If you can.)
If the IRS determines they were in the wrong (and it may take a while) you will be refunded the part they eventually pay. (If they do.)
If you report to the Labor Board they should also report it to the IRS.
Posts: 21182 | Registered: Sep 2004
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posted
Actually, they already paid me for expenses and mileage. For some reason they were able to handle that.
Thank you all for your help! I am pretty sure I am going submit the form fugu linked. Glad to see I was right here.
Posts: 2064 | Registered: Dec 2003
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