Discussion:1099 workers reclassed as employees

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Revision as of 14:15, 27 July 2007

Discussion Forum Index --> Tax Questions --> 1099 workers reclassed as employees

Ashland (talk|edits) said:

27 July 2007
Does anyone have experience with a situation like this?

I have been warning my client (roofing business) for years that he is playing audit roulette by giving all his helpers 1099s as subcontractors. Yep, one of them filed for unemployment and now Ohio is reclassifying them all (starting with 2004) as employees. To give you an idea of the scope of the problem, he pays about $40,000 per year divided among an average of 5-6 workers per year. Most are part-timers.

Do any of you have any tips about what we should do to get records filed with IRS? He doesn't even have a federal ID number yet. Do we need to file 941s/W-2s for all years starting with the year Ohio is reclassifying the workers? If so, how do we show that the workers received 1099s and so already have paid their own FICA and FIT? Does the newly-classified employer still have to pay all the FICA and FIT that should have been withheld from the start? If so, how do the workers get refunds for the double-paid amounts?

Is there a written guide anyone is aware of that I can consult regarding how to straighten out a mess like this? Are there traps that any of you are aware of that can be avoided if handled properly?

Thanks for your help. I learn a lot from these discussions.

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