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I'm wondering what the outcome would be for someone who files returns as a 1099 earner for 10 or so years. Has a solo 401k that he has contributed to for those 10 years and then somewhere along the way the IRS finds the employer has misused the 1099 process. Perhaps they were doing this with multiple other "independent contractors". It would seem there could be some serious issues for that person financially. Is there any 'excusable error' process?
Actually, that's exactly what the situation was at Microsoft for many years. They had what amounted to two populations of programmers and researchers - and they were hard to tell apart. The "independent contractors" were really more like long-term temporary employees. And after the case was settled, they were made employees of a temp agency, where they were subject to payroll taxes.

As for the IRS settlement, there were enough people involved that the settlement cost really fell on Microsoft, and they didn't go after the individual contractors, as far as I know. But in theory, they should have been able to go back 3 years, or however many were open, and make audit adjustments to their Schedule C expenses and health insurance and retirement plan deductions, if those were taken.

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