What is a 1099 Employee?
A 1099 Employee is someone who receives a 1099 from their employer instead of a W2. A 1099 Employee is considered a subcontractor instead of an employee. This person is not entitled to the benefits of an employee. Any income earned and reported on form 1099 to the IRS is subject to self-employment tax.
1099 Employee Redefined
A recent case in the California Supreme Court has redefined the definition of a 1099 employee. If you are an employer you should make sure that you are classifying your employees properly. This also means that if you are an employee you should make sure that your employer is classifying you correctly.
Employee vs. Subcontractor
An employer has tax obligations for employees. These tax obligations include paying a portion of their Social Security and Medicare taxes as well as Federal Unemployment Tax. As a 1099 employee (subcontractor) is responsible for the full portion of these taxes.
Determining Who is An Employee
There are certain conditions that determine whether someone is an employee or a 1099 employee (subcontractor):
- whether the company controls what the worker does and how the worker does the job
- how the worker is paid, whether expenses are reimbursed and who supplies the tools or supplies to do the work
- whether there are written contracts; if the work is limited or continues; and if the work performed is a key aspect of the business.
If you are unsure you can submit Form SS-8 to the IRS to request a determination.
If you need assistance filing amended tax returns as a business or individual related to incorrect classification we are here to help. Work directly with Enrolled Agents with more than 29 years in business and the experience that counts. Tax Professionals with an A+ rated service that have never had a single complaint in more than 29 years. A consultation is free. For questions Contact Us.
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