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Recently, the company I subcontract for most regularly as a freelance contractor has informed me that they are changing all freelancers' tax status to 'employee' as opposed to 'freelance contractor'....and will be issuing us W-2's instead of 1099's beginning with the next tax year. The IRS made them do this. Even incorporating myself would make no difference.

Since I do not work full-time for them, I am ineligible to join their 401K plan, yet will be unable to contribute to my own Keogh with income earned through their company.

So, I am looking for other companies to freelance for who do not have this policy in place. One company that has expressed interest is checking with the tax acct. This morning the payroll manager told me that there is a tax category called 'statuatory employee' which still involves a W-2, but the freelancer may still be classified as 'self-employed' for other purposes. I've never heard of this...does anyone know if this means I could still contribute to my Keogh as a 'statuatory employee'?
Thanks in advance. Meowiz
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Meowiz writes:

<<Recently, the company I subcontract for most regularly as a freelance contractor has informed me that they are changing all freelancers' tax status to 'employee' as opposed to 'freelance contractor'....and will be issuing us W-2's instead of 1099's beginning with the next tax year. The IRS made them do this. Even incorporating myself would make no difference.

Since I do not work full-time for them, I am ineligible to join their 401K plan, yet will be unable to contribute to my own Keogh with income earned through their company.

So, I am looking for other companies to freelance for who do not have this policy in place. One company that has expressed interest is checking with the tax acct. This morning the payroll manager told me that there is a tax category called 'statuatory employee' which still involves a W-2, but the freelancer may still be classified as 'self-employed' for other purposes. I've never heard of this...does anyone know if this means I could still contribute to my Keogh as a 'statuatory employee'?>>


A statutory employee is a worker in one of four categories:

a. A driver who distributes beverages (but not milk) or meat, vegatable, fruit or baked goods. A driver who picks up and delivers laundry/dry cleaning is also in this category. The driver must act as an agent or be paid on commission.

b. A full time life insurance sales agent whose principal business is with one company.

c. Someone who works at home on materials or goods supplied by others that must be returned. The work must be performed under specifications furnished by the employer/customer.

d. A full time salesperson who works on behalf of others and submits orders from wholesalers, retailers, contractors or hotels, restaurants and similar establishments. The goods sold must be merchandise for resale or supplies for use in the customer's business, and the work must be the salesperson's principal business.

The W-2 the statutory employee receives is reported on Schedule C of the 1040. As such, it seems to me it would apply as self-employed earnings upon which one may base a Keogh contribution.

To be safe, I suggest you pose this question on the Tax Strategies board where the tax experts reside.

Regards..Pixy
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Pixy,
thanks for the info on: A statutory employee is a worker in one of four categories: etc.

I am in none of those four categories, but I will doublecheck as you suggest on tax board.
many thanks!
Meowiz
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