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Can I send out a 1099?
My husband is a foreman for a house painting company. The company has several normal payroll employees that works on his crew, but they also have him use some "extra" help on larger jobs.
How he gets paid is the job is bid for x, his employer takes a percent, then there is payroll costs and material, and he gets the leftover.
These "extra" employees he has to pay from HIS paycheck. So the employer cuts his paycheck and he gives these people cash for their work.
We talked to the employer on having them 1099 these extra people rather than force my husband to pay them from his paycheck, and they said no. They suggested HE 1099 them, thus my question.
Being that we are not in business for ourselves, that my husband is an employee of this company but paying these extras from his paycheck, is he eligible to 1099 them? Or can only a business 1099 someone? The extra workers would like to be 1099ed and we want to 1099 them, or something equivalent. Anything to show they benefited from the income, not us.
The one independent contractor, or "extra help", has actually asked for a 1099 so he can report income. We know this employer is not being entirely right, and is harming us in the process by how he is requiring the "extras" to be paid under the table from my husband's paycheck!
Looking at the 1099 instructions, it says only businesses can use them. Being how this was done through my husband's work, can we still be eligible to send one out?
We do itemized deductions, and do claim many of my husband's tools, mileage, etc, already. Can we also claim these temporary workers whose pay comes from his income?
If it matters, my husband will get an income reported around $50,000-$60,000. Added to mine, we are over $100,000. We file jointly.
The one independent contractor, or "extra help", has actually asked for a 1099 so he can report income. We know this employer is not being entirely right, and is harming us in the process by how he is requiring the "extras" to be paid under the table from my husband's paycheck!
Looking at the 1099 instructions, it says only businesses can use them. Being how this was done through my husband's work, can we still be eligible to send one out?
We do itemized deductions, and do claim many of my husband's tools, mileage, etc, already. Can we also claim these temporary workers whose pay comes from his income?
If it matters, my husband will get an income reported around $50,000-$60,000. Added to mine, we are over $100,000. We file jointly.
Yes, his employer tries to treat him like a sub, but in reality under the law he is a w-2ed full time employee. That doesn't stop the employer from trying to put liability and subcontractor responsibility/status on him....
The company he works for is by no means ethical. But work is work right now. Next year we will be getting the contractor's license to open our own company and get away from this outfit.
None are illegal aliens.
3 Answers
- Anonymous10 years agoFavorite Answer
Here's the problem. Even you call these people employees--employees get W-2s, not 1099-Misc forms.
As for issuing the 1099-Misc forms, you have several issues--all of which should have been resolved before the men were paid. You would have to give each of them a W-9 and pray that they return them will full name, address and SSN. (Without those, you were required to withhold 28% and send it to the IRS). If these are for 2010, you are going to be charged a minimum of $50 per form.
As for deducting the money paid out, your husband is *still* screwed. As a W-2 employee, he can only deduct the money on his schedule A in the 2% section. If he grossed $100,000, that means the first $2000 doesn't count. If he paid out a significant amount, this can trigger AMT.
PS, the employer is assuming that some or all of these extra people are illegal aliens and is trying to insulate himself by having your husband be the middle man.
Edit, individuals *can* issue 1099-Misc forms. As for the guy asking for the form, he needs it to prove to the IRS he had income so he can get EIC. (He doesn't need the 1099 to report the income, but once EIC is involved, he needs proof and that's the best kind.)
The IRS has a loosely worded "trade or business" rule--which covers W-2 employees who hire people to help them do their job. (I don't, on the other hand, issue a 1099-misc to the guy who paints my home.) The problem I worried about is that the IRS has been getting aggressive on misclassified employees. Should they audit your husband reclassify this individual as an employee, your husband instantly becomes liable for the 13.3% fica/mc and a 100% penalty.
- 10 years ago
I would suggest that you download Form 3949-A http://www.irs.gov/pub/irs-pdf/f3949a.pdf from the IRS website and report this activity formally. Your husband's employer is committing tax evasion by treating these temporary employees as "contractors" and is trying to drag him into the fray by forcing their pay through his payroll account. There is no legal way that you can account for this and shield everyone from the IRS, so the best defense here is a full frontal assault since you have solid evidence of this tax evasion.
- Steve DLv 710 years ago
You and your husband need to see a tax attorney or accountant. If your husband is paying these folks out of his paycheck, then he is not really getting a paycheck, but is actually acting as an employer/subcontractor.
