Discussion:SS-8 and independent contractor - closed years
From TaxAlmanac
Discussion Forum Index --> Advanced Tax Questions --> SS-8 and independent contractor - closed years
Discussion Forum Index --> Tax Questions --> SS-8 and independent contractor - closed years
| 29 October 2009 | |
| I checked previous forums and did not see my situation addressed.
Client is an S corporation - single owner and had one "independent contractor" for period 2003 - 2006. Ind contractor filed SS-8 with IRS and she is being reclassifed as an employee. Reading through the letter from IRS, some of the years might be closed due to statute of limitations. Client did pay herself a salary and filed 941, 940, W-2/-3 for her S-corporation. Also, she did issue 1099's to her now re-classified employee. Question: Are the older years in fact closed? How about W-2/W-3 for the "new" employee? Are these year closed...never filed a W-2 for the new employee? Thanks. | |
| 30 October 2009 | |
| The instructions on the 941C say the statute of limitations on a 941 that was filed is 3 years from the April 15th following the year of the payroll. That means 2003 SOL ran out 4-15-07, 2004 SOL ran out 4-15-08, 2005 SOL ran out 4-15-09, leaving you with the 2006 SOL which runs out 4-15-2010. You only have an SOL if in fact a 941 was filed for each affected quarter.
I did not go on and look for 940, W-2 SOL. They most likely are similar. I had to amend payroll once for a similar situation. You must gross up from the net amounts paid to calculate the gross pay and the tax that you should have withheld. There are some relief provisions for those rates of tax but I don't remember what they were. Don't over look amending state returns as well if that applies. | |
| 30 October 2009 | |
| The statute for a Form 940 is different than for a Form 941. It runs 3 years from the January 31 due date (instead of April 15.) | |
Mikex2e7n5 (talk|edits) said: | 30 October 2009 |
| Since it was a reclassification of an independent contractor to an employee, 3509 rates would be what you need. No Gross Up.
See instructions for 941X lines 12 - 14 and line 20. You would use 3509(a) rates since a 1099 was issued. If the 941's were filed on time then it would be reasonable to believe that the IRS would not look into the 2006 years, since the SOL expires 4/15/2010. You would need to take care of 2007, 2008 and however many periods of 2009. 3509(a) rates are the Employers portion of FICA plus 20% of the employees portion. For IT W/H the rate would be 1.5% A corrected 1099 would be issued showing ZERO and a W-2 would be issued showing no employee withholding for SS, MC or IT. The employee would file a 1040X showing the extra wages, wiping out the Sch C if they put those amounts on a schedule C then paying their share of the FICA using form 8919 | |
Mikex2e7n5 (talk|edits) said: | 30 October 2009 |
| and of course I just noticed that you said the IC worked from 2003 to 2006... | |
| 30 October 2009 | |
| Thanks for the responses...so SOL for the 941 for 2003-2005 are closed. Question: Do we need to file W-2's for those years? No W-2/W-3 were issued for the employee just for the shareholder/employee. If we do have to issue W-2's how do you pay in taxes since the SOL is closed for those years? | |
| 30 October 2009 | |
| Thanks for the responses...so SOL for the 941 for 2003-2005 are closed. Question: Do we need to file W-2's for those years? No W-2/W-3 were issued for the employee just for the shareholder/employee. If we do have to issue W-2's how do you pay in taxes since the SOL is closed for those years? | |
Mikex2e7n5 (talk|edits) said: | 30 October 2009 |
| You really don't need to file W-2's for those years.
If the worker filed 1040's timely, then the statutes for the 1040's have barred for those years, except for 2006 (which is 4/15/2010). If the worker is REALLY wanting to pursue this, then they can file a 1040S with a form 8919 and attach a copy of the 1099-MISC and the SS-8 ruling | |
Mikex2e7n5 (talk|edits) said: | 30 October 2009 |
| of course I meant 1040X.....sorry, just washed my hands and can't do a thing with them | |
