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Got a w-2 instead of 1099

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Latest post Mon, Apr 4 2016 1:44 PM by Taxagent. 5 replies.
  • Mon, Apr 4 2016 7:06 AM

    • MrsGramp
      Consumer
    • Top 500 Contributor
    • Joined on Sun, Jul 18 2004
    • Posts 76

    Got a w-2 instead of 1099

    I worked for a small business in Kentucky doing income taxes.  When I was hired, I was told I'd be working on commission and will receive a 1099 at the end of the year.  However, when I did start, they decided to pay me $9.00 an hour and I was to clock in and out each day, After the tax season was over, I decided to try to draw unemployment on a claim I had previously opened.  They needed proof of my hours and everything, and I didn't have it.  I was offered another job, and went to work somewhere else and didn't pursue unemployment.  The end of January, I received a W-2 from the tax place and questioned the employer why and she told me they had to because they had to pay in unemployment, etc. on me.  Now, I am having to pay taxes on this money and I don't feel it's fair, because if I had had the opportunity to have the taxes withheld, I would have certainly done so.  During my time with the company, I was told I could write off my mileage, etc. to help reduce my tax liability:  however, now that I have a W2, this is not the case.

    Any suggestions?

  • Mon, Apr 4 2016 7:20 AM In reply to

    Re: Got a w-2 instead of 1099

    The money you received for the work done is taxable in either case. If you were self-employed, you’d also be paying self-employment tax (FICA taxes, which are for Social Security and Medicare) on your pay, which is over 15% of your net self-employment earnings. Presumeably the W-2 shows that FICA taxes were withheld for your half of those taxes and that the employer paid it's half of those taxes. If so, that's saving you a lot of tax to pay now. You may still deduct the mileage and other unreimbursed employee expenses you incurred if you itemize deductions. 

  • Mon, Apr 4 2016 9:04 AM In reply to

    Re: Got a w-2 instead of 1099

    MrsGramp:
    The end of January, I received a W-2 from the tax place and questioned the employer why and she told me they had to because they had to pay in unemployment, etc. on me.  Now, I am having to pay taxes on this money and I don't feel it's fair, because if I had had the opportunity to have the taxes withheld, I would have certainly done so.

    Did the W-2 show no Federal or state income taxes were withheld?  If so, then yes, you will have to pay your income tax when you file your return.  Since they were required to withhold the Social Security and Medicare taxes (6.2% and 1.45%, respectively, of your gross pay), I'll assume your W-2 indicates that they did that unless you tell us otherwise.

    As Taxagent said, if you HAD been given a 1099, you'd have had to pay your income taxes AND both halves of the Social Security and Medicare taxes out of your pay (the employer also pays 6.2% for Social Security and 1.45% for Medicare if you are a W-2 employee, but if you are an independent contractor you have to pay it yourself instead).  That's 15.3% of your gross pay, in addition to your income taxes.  So it's better to be a W-2 employee, for any given pay rate.

    That said, they really should have given you a W-4 to fill out at the beginning.  If they were not experienced at being employers (especially if they thought at the time that they could give you a 1099), they might not have realized that back then.

    MrsGramp:
    During my time with the company, I was told I could write off my mileage, etc. to help reduce my tax liability:  however, now that I have a W2, this is not the case.

    As a W-2 employee, your commuting costs aren't tax-deductible, that's true.  Only miles driven on the job (going to and from client sites, for example) would be deductible.

  • Mon, Apr 4 2016 10:12 AM In reply to

    Re: Got a w-2 instead of 1099

    FYI, here's a link to the 2015 IRS Publication 15, which tells employers how to do the Federal withholdings.

    Also, out of curiosity I looked it up and according to this, Kentucky doesn't require paystubs.  Employers with 10 or more employees are supposed to include with each pay a list of the deductions they took out of that pay, but if this business had fewer than 10 employees it wasn't even required to give you that.

    For any future timeclock job you might work, I recommend keeping your own records of when you punch in and out each day, just in case there is a timeclock malfunction or a dispute.  If instead the job requires timesheets, keep copies of all your timesheets.  That's what I would do, anyway.

  • Mon, Apr 4 2016 11:30 AM In reply to

    • MrsGramp
      Consumer
    • Top 500 Contributor
    • Joined on Sun, Jul 18 2004
    • Posts 76

    Re: Got a w-2 instead of 1099

    I have done some research on all this before I even posted this question.  From what I'm understanding, if the employer controls your time, for example, clocking in and out, and if they furnish your equipment, for example, computer, etc, then you are indeed an employee and not a contractor.  They have been in business several years, but I think they choose to treat their employees as if they are contract laborers in order not to pay taxes, unemployment, worker's comp, etc.  I am going to pay my taxes, like I always do, but I prefer a little taken out at a time, rather than a big hunk all at once.  I know they have to know the rules, because they do bookkeeping and taxes for other businesses.  They were just getting even with me for filing unemployment which made them have to pay up.  

  • Mon, Apr 4 2016 1:44 PM In reply to

    Re: Got a w-2 instead of 1099

    MrsGramp:
     I am going to pay my taxes, like I always do, but I prefer a little taken out at a time, rather than a big hunk all at once.

    But even as an independent contractor the pay was taxable and the employer would not have taken anything out for income tax. So it would have been on you to send in estimated tax payments. While I agree that the employer should have done the withholding (after asking you for a W-4) if you were an employee, you evidently knew that the tax was not being withheld so it was up to you to see that the income tax was covered.

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