Hello,
Thanks for the answer but I think that I confused you. All the sales people at the company that I work for are w-2 employees. The company pays all commissions to their sales people in the form of another check that is not part of the payroll.

The issue is, that even though this is a sales commission, they don't report it but treat it as 1099 earnings. Here is the catch. For 20 years they have paid these commissions and never issued a 1099 to anyone. Also they have never reported this income to the IRS.

So... isn't it illegal to pay commissions to a salaried w-2 sales person and then give them 1099 wages? Especially since they don't issue or report these wages. This appears that it is being done to avoid having to pay the associated fica etc. for the rest of the money which is significantly more, than the base pay. Your thoughts?

Warmest regards,
Larry

Hello,
Thanks for the answer but I think that I confused you. All the sales people at the company that I work for are w-2 employees. The company pays all commissions to their sales people in the form of another check that is not part of the payroll.

The issue is, that even though this is a sales commission, they don't report it but treat it as 1099 earnings. Here is the catch. For 20 years they have paid these commissions and never issued a 1099 to anyone. Also they have never reported this income to the IRS.

So... isn't it illegal to pay commissions to a salaried w-2 sales person and then give them 1099 wages? Especially since they don't issue or report these wages. This appears that it is being done to avoid having to pay the associated fica etc. for the rest of the money which is significantly more, than the base pay. Your thoughts?

Warmest regards,
Larry



Should not be a new thread - should follow the original post.

I don't know if it's illegal but I have worked jobs for salary and also done other work for the firm as a 1099 employee. Never was a problem. CPA does my taxes. He never had a problem or lifted an eyebrow.

Reporting the income is the responsibility of the 1099 employee and (obviously) the 1099 employee is responsible for all taxes, including FICA.

An employer can report wages on W2 and commission on 1099-Misc. Even the employer does not issue 1099-misc, the employee must report this income on the tax return. Employee is responsible for paying the FICA taxes, which in this case are SE taxes at 15.3%.
How you will treat the 1099-Misc income, read: Your U.S. Tax Return: W2 vs 1099-Misc: Employee vs Independent Contractor. (http://taxipay.blogspot.com/2008/03/w2-or-1099-employee-or-independent.html)

As I answered on the email to you, if the employer actively, consistentently and consciously pays its employees, then fails to report that pay as income the IRS, the employer, In my opinion, is committing tax fraud.

If you want to report them to the IRS, and the IRS determines they have NOT been properly reporting this income and determines that tax fraud has occurred (an important consideration, because the IRS can go back to the dawn of time if fraud is involved, whereas if it is a simple oversight or omission, they can only go back ten years to assess back taxes), you may be eligible for a substantial reward based on a percentage of the taxes collected.

Call the IRS Tax Fraud Hotline if you think the law has been broken.

Of course, if the employer finds out (which is a distinct possibility), do NOT expect to retain your job.