New Form for Employees Misclassified as Independent Contractors

In 2007 were you an employee whose employer paid you as an independent contractor? Employees usually receive a Form W-2 while independent contractors usually receive a Form 1099-MISC.

Generally, a worker who received a Form 1099 for services provided as an independent contractor must report the income on Schedule C and pay self-employment tax on the net profit using Schedule SE. However, if the worker was actually an employee, rather than an independent contractor, the worker is not required to pay the full self-employment tax, and expenses can only be deducted as an itemized deduction.

Beginning in 2007, Form 8919, Uncollected Social Security and Medicare Tax on Wages, may be used if you were an employee and your employer did not withhold your share these taxes and you meet certain criteria. These taxes will then be credited to your social security records.

To be eligible to use Form 8919 you must meet one of several criteria indicating that you were an employee while performing these services. The criteria include:

  • You filed Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, and received a determination letter from the IRS stating that you are an employee of the firm.
  • You have been designated as a “section 530 employee” by your employer or by the IRS prior to January 1, 1997.
  • You have received other correspondence from the IRS that states you are an employee.
  • You were previously treated as an employee by the firm and you are performing services in a similar capacity and under similar direction and control.
  • Your co-workers are performing similar services under similar direction and control and are treated as employees.
  • Your co-workers are performing similar services under similar direction and control and filed Form SS-8 for the firm and received a determination that they were employees.
  • You have filed Form SS-8 with the IRS and have not yet received a reply.

For more information see Form 8919, Uncollected Social Security and Medicare Tax on Wages available on the IRS Web site at IRS.gov or by calling 800-TAX FORM (800-829-3676).

Remember that for the genuine IRS Web site be sure to use .gov. Don’t be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov.

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[TaxMama Note: Boy did IRS leave out a whole lot in this announcement!

In order to use this form, you have to use several others, too!

See the Resource Box below for links to all the forms I am about to describe for you.

To use this form, you need to use two others as well – for EACH 1099 you received that you are contesting.

1) Form 4852 – Substitute for W-2 – fill out one of these to replace each 1099. Include the state info, since you can also use this with your state return.

http://www.irs.gov/pub/irs-pdf/f4852.pdf
This is the one we always used in the past.

2) Fill out Form SS-8 for each job – to prove that you were not an employee. You will need to include a copy with your tax return AND file it with IRS at the mailing address on the form’s instructions.
http://www.irs.gov/pub/irs-pdf/fss8.pdf

In the past, we only used to use this when the amount was quite large. Now, it seems you must use this every time.

It’s a huge amount of work and some of us have protested to IRS and suggested that they establish a policy providing a minimum income level where the SS-8 is waived. No response yet.

Read the instructions for each form carefully.

Cross your t’s; dot your i’s – and you’ll have quite an adventure in filing. You’ll probably need to get the help of a tax professional to do this correctly. It IS complicated.

But, once you’re done, you’ll pay less in taxes – AND you will have the joy of placing those former employers under the scrutiny of IRS. ]

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  • www.irs.gov :: The REAL IRS Website
  • Form 1099-MISC :: Report of Miscellaneous Income you received
  • Form 8919 :: Uncollected Social Security and Medicare Tax on Wages

  • Form 4852 :: Substitute for W-2

  • Form SS-8 :: Determination of Worker Status for Purposes of Federal Employment Taxes

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