1099 and W2

peridotpa · May 2004

We are a non-profit company in the Midwest. We have some employees receiving both 1099's and W2's. Is this legal? What consequences/penalties could this bring if it is not legal?

Gillian3 · May 2004

There are employees (W2) and independent contractors (1099). They are different and certainly don't mix as you are doing. Because you do not pay certain employer taxes for 1099 individuals you are violating federal and state regulations, including IRS and your state tax agency so you are talking back tax payments and penalties. The agencies focus in this area so the chances of eventually being caught are higher than in some areas. Change the 1099 individuals and fast.

peridotpa · May 2004

Gillian3 - Thank you very much for the information. Can you site me regulations/references so I can take this information to my superiors with legal confirmation, please? That is important for my company.

Gillian3 · May 2004

Try looking on the IRS web site for stuff about Independent Contractors. If you can't find anythink let me know your fax # and I will see what I can fax - assuming I didn't throw my material away when we moved.

peridotpa · June 2004

Gillian3 -

I have not been able to find information on the IRS website that pertains to the question we have been discussing. I find information on paying independent contractors and the determination of who would be an independent contractor, but that does not help me to show why we should not pay an employee on our payroll receiving wages should not receive a W2 and 1099. Please fax whatever information you can to 317-802-5211. It will be most appreciated.

Thank you.

Don D · June 2004

It cannot make sense that you would do both. An employer must furnish workers with a record of wages paid, in most instances. The Form 1099 is only used for that purpose involving an independent contractor. The W-2 is only used to record wages paid to employees. A person cannot be both at the same time. You could have a person who transitioned from one status to the other though. Then you might issue both forms at the end of the year. I forget the cutoff, $300, $600? and if the contractor is paid less during a year, he is issued no form at all. If you have an accountant they can clear it up and can provide a code section.

peridotpa · June 2004

Thanks so much, Gillian3. I received your fax. It will be very helpful for me. I appreciate your help. Periodopa

twochr · June 2004

This is not illegal if the reason they will get both a 1099 and a W2 is because they were employees for part of the year and independent contractors for part of the year. We have had that numerous times and have checked and it is fine. You have no other alternative. But the 1099 and the W-2 cannot cover the same time period!

Donna Banker · June 2004

We have an employee who gets a W-2 and a 1099-Misc. Depends on the job he is doing and following the IRS definition of independent contractor. He cleans our foreclosed properties and details repo vehicles - which has nothing to do with his regular job for us. And this was approved by our CPA firm.

NaeNae55 · June 2004

I read in a financial publication that though unusual, it is possible to have both a 1099 and a W2 in the same year. However, the publication said that this was a red flag for the IRS and would result in an audit.

BE CAREFUL!

Good luck.

Donna Banker · June 2004

[font size="1" color="#FF0000"]LAST EDITED ON 06-15-04 AT 11:39AM (CST)[/font][br][br]Pub 15-A has the definitions of employees and independent contractors. Whether you can control what will be done and how it will be done is the determining factor between an employee and independent contractor. And, I think, it has to be something totally unrelated to the employee's job duties.

We also have an employee who is a teller (W-2) who also takes care of the plants around one of our offices (independent contractor). When taking care of the plants, he sets his own hours, decides what he is going to do, etc. Very different from employee.

1099 and W2

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