[snischke]

Last year I received a 1099 misc with box 3 filled out from my employer - the IRS called me and said that I had to file that amount as self-employed... my employer says that I am not considered 'self-employed' but the IRS says that if that is the case my employer is filling out the wrong box (should be box 7) When I try to discuss this with my employer, I am told they are doing it correctly and I am NOT self employed! I don't know how to file my taxes - my employer says they are correct and the IRS says they are wrong. In the mean time, I have to file my taxes and don't want another call this year! What should I do?

[smoothy]

Here is a easy way to know...

If you were their employee, they will be taking out taxes and SSI... and paying the employers share of the SSI as well. If they aren't then you most certainly ARE self employed and they are breaking the law. You pay taxes quarterly if you are self employed... they are required by law to withhold taxes if you are their employee.

[ebaines]

If you are an employee then your employer should be issuing you a W2, not a 1099-MISC. The 1099-MISC is for non-employees. And box 3 of 1099-MISC is for reporting "other income" to non-employees - such as prize winnings or special awards. But please take another look at your 1099-MISC and tell us what does your employer report in Box 4 ("Federal Income Tax Withheld")? And to support what Smoothy said: take a look at your pay stubs that you get each pay day - do they show that your employer is withholding social security tax, federal tax, and state/local income tax (if applicable where you live)? If they are not withholding these things then you are self-employed and your employer should report your wages in Box 7 of 1099-MISC. If they are withholding these things then you are an employee and they should be issuing you a W2 form instead of a 1099-MISC.

[joypulv]

I assume that you also get a W2?
Then they should be using box 7.
Is the bulk of your income on the W2?

[joypulv]

Crossed in the mail with ebaines..

[snischke]

Yes - my main income from them is on W-2

[snischke]

My W-2 has all the normal taxes withheld but what they put on the 1099-MISC has nothing but box 3 filled in -

[ebaines]

Now we're getting somewhere. Since they issued you a W2 you are indeed an employee. But for some reason your employer is providing taxable payments or taxable benefits to you that he did not include on the W2. This is unusual, but not unheard of. Can you tell us what these payments or benefits are? For example are you being reimbursed for something like moving expenses? Have you earned any bonuses? Have they given you any special prizes or awards? Any other idea what these payments might be?

[snischke]

I help make sure the office is cleaned as needed

[joypulv]

They should not be paying you to clean as a contractor. You don't meet the requirements. You are on their premises not as a business of your own with your own comp and liability but as an employee doing side work.

But now you have to pay self employment tax on that amount or tell them to give you a corrected W-2.
In the future, don't agree to this arrangement.

[snischke]

I finally got them to now add it on my paycheck but they pay me in once a month on one of my checks which is gone to taxes anyway! So now for 2010 I still will have to say I'm self employed and pay al the taxes again this year? Thank everyone for their input!

[joypulv]

You should be able to add that income to the line on the 1040 for misc income and write a note saying that the 1099 was a mistake, but you will still owe taxes on it, no matter how it's done.
1099 income is taxed to you at full Social Security rate, whereas wages (W2) income the employer pays half and the employee pays half. So your employer was trying to get away with a better deal for themselves.
The rate is 7.65% for each half.