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That is true, but some companies try to get around things like paying unemployment by having 1099 contractors when the people should be employees, and it is the IRS code that governs that decision.

This thread has now made its way to the tax board, so let me address the tax issue, which feeds the unemployment issue. As I understand the situation, the person involved was treated as a contractor but believes he should have been treated as an employee. He has paid his income and employment taxes, although I'm not clear as to whether he's paid full self-employment tax or just employee FICA/Medicare. I'm also not clear as to whether he's made 2005 estimated tax payments. He has referred the employer/employee issue to the IRS.

If the ultimate determination is that he should have been treated as an employee, yes, the employer will be liable for unemployment tax, and yes, he will be entitled to unemployment benefits. Contrary to one post that said the issue is "cut and dried," the issue may be, but the process is far from. These things can take years to be resolve on the basic issue, and then the state, which administers the unemployment program, has to play catchup after that. Even if he's right, he should in no way be counting on unemployment benefits by September 2005.

Phil
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