Tax Time Means 1099 Kinds of Trouble

February 3, 2013 by Leave a Comment

Dear Compliance Man,

My boss tells me we are in a “contracting relationship,” in which he “subcontracts” my laboring for his construction business. Trouble is, I have a hunch that I’ve been left holding the tax bag. It sure seems strange to say I’m in business for myself. Last I checked, he’s calling the shots.

– “Holding the Bag” in Boxboro

Dear Boxboro,

If you get a 1099 in the mail, it means that your boss hasn’t been withholding money from your paycheck in order to pay taxes. In the worst case situation, you could end up with a huge tax bill come April 15th.

But before you sell your house or pawn your dog, it’s important to find out if you really are an independent contractor. As the IRS explains, the issue is very complicated – what else is new! The good news, though, is that as a construction worker, unless you have your own business, you are almost always an employee – not an independent contractor.

Does your boss tell you what to do or how to do it? If you are told how, when, or where to do the work, what tools or equipment to use, or where to purchase supplies and services, you’re probably an employee. Have your received on-the-job-training? This indicates that your boss wants the work done a certain way, and that you are probably an employee.

If you need help figuring out your status, call the Foundation for Fair Contracting at 1-877-507-3247, or call the IRS at 1-800-829-1040 and ask for a form SS-8. And if the IRS finds out that your boss misclassified you? Well, then it’s up to your boss to pick up the bill. So check your status before you write that check.

For more commonly asked Compliance Man questions, visit the Compliance Man archives. Send your question to info@ffcm.org.

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But I’m an Employee, Right?

January 14, 2010 by

Dear Compliance Man:

I got hired as a painter six months ago. I was happy to find work but there’s always been something kind of funny about this job. My boss says that we’re not employees but independent painters. Since I started, I’ve worked on a couple of schools and some private stuff and I always get paid the same flat rate, no taxes taken out. Is this illegal?

–Painted into a Corner

Dear Painted:

Thanks for writing. I understand how tough it is in this economy to come forward and question an employer when so many construction workers are out of work.

Your instinct is almost certainly correct though. For years, employers have been trying to skirt state and federal wage laws by claiming that you are your own boss. In fact, a study of construction contractors in Massachusetts found that 14% of them had wrongly classified their workers as independent contractors, denying them the wages and benefits they’re legally entitled to and sticking them with a major bill come tax time. Fortunately, both state and federal authorities have begun to crack down on this particular scam.

The bottom line: if your boss calls the shots about where and when you work and provides you with the equipment necessary to do your job, you are NOT an independent contractor.

For more commonly asked Compliance Man questions, visit the Compliance Man archives. Send your question to info@ffcm.org.

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