26,000,000 people filed for unemployment in the past several weeks; and it’s not over! The Coronavirus is causing serious financial issues for states. For the first time ever, independent contractors are eligible under the CARES Act , even though unemployment taxes may not have been paid in. When the states start looking at all the workers who were 1099, what action will they take?
The IRS is just as interested in independent contractors, even more so; only for very different reasons!
Up until 2019, wages paid to independent contractors were reported on I.R.S. form 1099-MISC. Starting in 2020, payers will report on the NEW I.R.S. form; 1099-NEC – Non Employee Compensation. New form, no problem! Except…employers need to know what the instructions to their workers say:
“YOU RECEIVED THIS FORM INSTEAD OF FORM W-2 BECAUSE THE PAYER DID NOT CONSIDER YOU AN EMPLOYEE AND DID NOT WITHHOLD INCOME TAX OR SOCIAL SECURITY AND MEDICARE TAX. IF YOU BELIEVE YOU ARE AN EMPLOYEE AND CANNOT GET THE PAYER TO CORRECT THIS FORM, REPORT THIS AMOUNT ON THE LINE FOR “WAGES, SALARIES, TIPS, ETC.” OF FORM 1040…”
In other words, if the worker believes he/she is an “employee” when they file their personal (1040) tax return they are instructed to report 1099 wages AS IF they WERE W-2 wages. Yeah, that shouldn’t raise any red flags! Feel free to email questions in advance to: firstname.lastname@example.org. See you Tuesday!
email@example.com (866) 256-3766
#W-2, #1099, #compensation #employers