The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies


Subject:  Re: 1099 income Date:  4/5/2011  4:41 AM
Author:  TMFPMarti Number:  112980 of 127513

My daughter worked in 2010 for several different employers. She got W2's from all except one and they were going to use a 1099 instead of W2.

Why? How is the situation appreciably different with the 1099 outfit? People don't seem to realize that this isn't dealer's choice, but a matter of law. Granted, it's hazy law missing some bright lines, but law nonetheless.

In today's economy it behooves any person looking for work to bone up on the difference between employees (W-2) and independent contractors (1099). A starting place is the discussion in IRS Publication 15 and Form SS-8. A lot of employers misclassify workers to save themselves money.

The 1099 company paid her about $500 in 2010 and deferred her last pay check (approx $120) from December to Jan 2011. She also did some work in Jan 2011 and may do more work there later in 2011.

What do you mean "deferred" her paycheck? Past when she should have been paid? And she still wants to work for them? If it's just the usual situation that work late in December is compensated in January there's no problem, but if they're not paying on payday this is a red flag.

They said that they did not have to issue a 1099 for 2010 since they paid her less than $600 and they'd put both the 2010 and 2011 income on the 1099 they'll issue for 2011.

They're half right. They don't have to issue a 1099 for less than $600, but they cannot lump two years together on one 1099.

She has to file for 2010 since she had W2 income from the other employers. Does she ignore the "1099" income earned in 2010 and show it next year on her 2011 tax return? Or does she have to report it as 2010 income even though the employer is putting it on her 1099 for 2011?

She reports the $500 she received in 2010 on her 2010 return, Schedule C of the 1040. If it turns out that this really should have been W-2 wages, get back to us for the alternative way of dealing with this. But in no case does it go on her 2011 return when it was paid in 2010.

Rule Your Retirement Home Fool
Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us