Anonymous wrote:

Anonymous wrote:Ugh...

Yeah I don't want to get my employer in trouble but I also don't want to be misclassified by the IRS either! I don't want them in my shorts just because he unknowingly misclassified me. I say unknowingly because he is a very ethical guy so I can only assume this was done in error.

For clarification - he is a financial advisor and I am his marketing and admin person. All of my work is directly related to his business. I don't perform any services not related to his day-to-day business.

if you never file a complaint, you will not have any legal trouble with the IRS or any other agency, as long as you correctly calculate and pay all of your taxes. you will be getting screwed to the tune of ~7% of your pay, because you have to pay ALL of your payroll taxes, rather than splitting them with him (as would be the case with a W-2 employee). if you can live with that, you can keep things the way they are, and the only person who stands to be fined is your boss (and unless a complaint is filed, the chances of that are almost 0. i am an attorney and once worked for a sole practitioner who classified all of his associates as contractors. he had done this many, many times and been caught and even he was never actually fined by the IRS. they just made him kick in for the payroll taxes.)

thanks PP, excellent info.

I want to keep my job and like my employer but I'm not in the habit of paying the IRS and extra 7% in taxes either. what a mess

I think I will just talk with him and let him know that I THINK he is misclassifying me and see what he says. Knowing him he will want to fix it. I think he assumed that I was a 1099er because he has a bookkeeper that works for him as well and she is 1099. when he hired me, because I was unfamiliar with how to declare my taxes as I have always been a W2 employee, he told me to talk with her to see how she paid her quarterly taxes and to do whatever she does. She's the one who told me to do it this way....but I guess she's confused because she truly is an independent contractor as does bookkeeping for a few self-employed individuals in the area. We are just one of her "clients".

Re the 401K question, I want to contribute as much as I legally can so will need to really research my options. Backdoor Roth is not attractive to me as I have a friend who did this and she and DH got audited...turns out they did it the wrong way. They have been under the microscope for 5 yrs already just because of this error They are both FT W2, high earners. She regrets doing it.

actually, i think OP could get into trouble potentially if she takes advantage of an SEP or other self-employed deductible retirement program that otherwise wouldn't be available to a W-2 employee whose employer doesn't offer a 401(k).

chances of her getting caught are probably slim to none, but still a possibility.

By definition, you are not a contractor. You work for one person, not many people. If you were a house cleaner for only one family vs many families.

Anonymous wrote:

Anonymous wrote:Also, if your employer has a 401k, health benefits, etc. he/she/it is running a huge risk of having those plans declared non-tax-deductible if employees are being improperly excluded from those plans (known as discrimination, in the ERISA universe).

zero benefits. just a paycheck, written out of his checking account.

If you like getting paid and want to keep working for/with this person, just stay out of it - it is his/her problem. Highly doubt there would be any consequences to you if you are paying self-employment, federal, and state taxes on your income.

For the 401k - get an FEIN from the IRS using your name, have your 1099 show this FEIN instead of your SS. Use the FEIN to open a individual 401k (fidelity has one with no fees, very easy to set up). You can put 17,500 in it, plus up to 20% of your business net profit - so if you made 30k and had no expenses you could put 23,500 in for the year. It would not work for 2013, as I believe the account had to be opened by 12/31.

Anonymous wrote:Ugh...

Yeah I don't want to get my employer in trouble but I also don't want to be misclassified by the IRS either! I don't want them in my shorts just because he unknowingly misclassified me. I say unknowingly because he is a very ethical guy so I can only assume this was done in error.

For clarification - he is a financial advisor and I am his marketing and admin person. All of my work is directly related to his business. I don't perform any services not related to his day-to-day business.

if you never file a complaint, you will not have any legal trouble with the IRS or any other agency, as long as you correctly calculate and pay all of your taxes. you will be getting screwed to the tune of ~7% of your pay, because you have to pay ALL of your payroll taxes, rather than splitting them with him (as would be the case with a W-2 employee). if you can live with that, you can keep things the way they are, and the only person who stands to be fined is your boss (and unless a complaint is filed, the chances of that are almost 0. i am an attorney and once worked for a sole practitioner who classified all of his associates as contractors. he had done this many, many times and been caught and even he was never actually fined by the IRS. they just made him kick in for the payroll taxes.)

Anonymous wrote:Also, if your employer has a 401k, health benefits, etc. he/she/it is running a huge risk of having those plans declared non-tax-deductible if employees are being improperly excluded from those plans (known as discrimination, in the ERISA universe).

zero benefits. just a paycheck, written out of his checking account.

Ugh...

Yeah I don't want to get my employer in trouble but I also don't want to be misclassified by the IRS either! I don't want them in my shorts just because he unknowingly misclassified me. I say unknowingly because he is a very ethical guy so I can only assume this was done in error.

For clarification - he is a financial advisor and I am his marketing and admin person. All of my work is directly related to his business. I don't perform any services not related to his day-to-day business.

Also, if your employer has a 401k, health benefits, etc. he/she/it is running a huge risk of having those plans declared non-tax-deductible if employees are being improperly excluded from those plans (known as discrimination, in the ERISA universe).

Anonymous wrote:Thanks for clarifying PPs.

So it seems that IRS definition I am not an independent contractor. So that brings me back to my 401K question and also opens the door to my next question regarding taxes.

This is my first time working for someone where I pay my own taxes. But clearly we have an employer/employee relationship. I paid my first quarterly taxes a few months ago and am about to pay again. I used a 1040 for this and estimated. Perhaps I paid too much assuming that I was also paying self-employment taxes??

yes my one part question has now turned into a two-part question.

IF you want to pursue $ from your employer, the appropriate route is to file a form ss-8 with your tax return. The IRS will make a determination and just charge your employer your share of taxes he should have been paying (ie, payroll taxes) for 2013. For prior years, I believe you have to file a different form to try to get the money out of him.

Having said that, you will no longer be working for this employer if you do this.

PP here. you also say your employer is careful to report to the IRS re "everyone who works for him." the words "employer" and "works for him" suggest highly to me that you (and everyone else) should be classified as an employee, not a 1099.

Thanks for clarifying PPs.

So it seems that IRS definition I am not an independent contractor. So that brings me back to my 401K question and also opens the door to my next question regarding taxes.

This is my first time working for someone where I pay my own taxes. But clearly we have an employer/employee relationship. I paid my first quarterly taxes a few months ago and am about to pay again. I used a 1040 for this and estimated. Perhaps I paid too much assuming that I was also paying self-employment taxes??

yes my one part question has now turned into a two-part question.

generally speaking, unless you are being hired to perform a service unrelated to your "employer"'s business and you are a free agent (with respect to the way in which you go about doing your work), you are an employee. if you are classified as a 1099, you are being illegally misclassified. your employer could be fined, not to mention on the hook for its share of your payroll taxes (about 7% of your pay).

so, if a law firm specializing in wills and estates hires a paralegal as a 1099 to work a couple days a week on wills and estates matters, the paralegal is being misclassified.

if the law firm hires a guy to install tile in the bathroom, set up an IT system, etc. that person is a 1099. possibly, if the law firm hires a marketing consultant who comes up with ideas to market the firm, that person could be a 1099.

obviously the law is much more nuanced than this, but that is a general overview.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Are you really a 1099 or just being misclassified?

SEP if you want the deduction, back door Roth if you don't.

Not sure I understand your question regarding being misclassified?

I am paid gross and pay my own taxes. My employer is legit, and is careful to report everything to the IRS including everyone who works for him and our SSNs.

If you have a regular employer there is a decent chance you might be an employee, rather than an independent contractor.

Ok so that fact that I get a 1099 and pay my own taxes does not = independent contractor? Not being snarky, I truly don't know. I thought I knew??

Nope. There are specific rules.

Anonymous wrote:why work when your spouse makes 9X more than you?

because its not just about the money you douche.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Are you really a 1099 or just being misclassified?

SEP if you want the deduction, back door Roth if you don't.

Not sure I understand your question regarding being misclassified?

I am paid gross and pay my own taxes. My employer is legit, and is careful to report everything to the IRS including everyone who works for him and our SSNs.

If you have a regular employer there is a decent chance you might be an employee, rather than an independent contractor.

Ok so that fact that I get a 1099 and pay my own taxes does not = independent contractor? Not being snarky, I truly don't know. I thought I knew??