Problem w/ 1099 Misc - $999 self employment tax?
In 2009 I worked as a part time employee and was paid gross by personal check. The company filed these wages as a 1099 Misc. I did not file this with the IRS (i know, I messed up) and recently got a letter for unpaid taxes, including a $999 self-employment tax. I have no problem paying my share of taxes, but how do I get out of this self-employment tax, since I was very clearly an employee, and NOT an independent contractor. Please help!
Comments
1. File a Form SS-8 http://www.irs.gov/pub/irs-pdf/fss8.pdf with the IRS to get a formal ruling on your status.
2. Prepare a Form 8919 with the IRS in response to the CP2000 notice. Mark reason code 'G' in column c.
3. To stop the accrual of penalties and interest (in case the IRS determines that you are an independent contractor after all) pay the tax NOW. Enclose your check for payment in full along with the 8919 and a short note explaining that you believe that you were misclassified as an independent contractor and should be treated as an employee. Attach a copy of the SS-8 to your note. Send the package to the address on the CP2000 notice.
If the IRS agrees with your position that you were an employee, they will refund the excess tax paid.
Arguably you could also just pay the total on the CP2000 notice, file the SS-8, and then file an amended return on Form 1040-X showing the income as an increase on line 7 of Form 1040 and attach the 8919 to the 1040-X to calculate your share of the FICA taxes. The end result will be the same.
File Form SS-8. The government will evaluate the Form SS-8 and decide if you were really an employer or an independent contractor. They nearly always decide the person was an employee and do not require payment of the self-employment tax.
So, they treated you as a contactor, yet you believe you were an employee.
The difference is that contractors pay 100% of fica/mc and employees only pay half.
To fight it, you have to file an SS-8 and get the IRS to agree with you. If they do, you can $541 of fica/mc instead (your half on $7070 income). Your income for tax purposes will be $7070 and not $6570. The SS-8 can take 3-6 months to process.
You will need to set up payments in the mean time.
File form ss-8 with the IRS asking for a determination of whether you were an employee. If they agree with you, you'll only have to pay the half of the se tax that you'd have paid anyway as an employee.
1099 makes you an independent contractor. Your employer screwed you. Form SS8 goes to the IRS to establish your status.
you may not consider yourself as an independent contractor but the person who paid you did, and issued you a 1099 Misc and almost universally this would be Sch C and SE(self employment)
You are mistaken. You were treated as an independent contractor and you need to file form 1040 and schedule SE to figure your taxes.