FORM 1099 OR w-2

[Jack from Ohio]

Illogical. Taxable on all levels, yes, but not all subject to withholding.

If this worker was incorporated with otherwise the same facts what say you?

If he were incorporated, this discussion would not be happening.

[Jack from Ohio]

>>Wages paid to qualify for Unemployment = taxable wages on all levels.<<

Nonsense--the laws are different. Perhaps the most common example is employee contributions to a 401(k) plan, excluded from gross income but still covered by UIB and Social Security. Many fringe benefits are treated differently under the various laws. Payments to family members would not always earn your equal sign. All sorts of excluded military and government and foreign wages may qualify for UIB even if non-taxable.

And the equal sign is supposed to go both ways, but obviously there are lots of taxable wages that don't qualify for UIB. So I would say the idea is not logical at all.

So your contention is that this worker's payment, if he is deemed to be an employee, is exempt from taxation?

[JohnH]

If I did the math right, the individual was paid $2,700. Using Employer's FICA/MED of just under 8% and an unemployment tax rate of 3-4%, the payroll taxes are about $270 - $300. So if the tax preparer "goes to bat" for client, the most the client is going to save is $240-$300 minus the fee to do the work. Anybody willing to take this on for less than $200, knowing that once the paperwork blizzard starts you could easily run up another $200 - $300 in fees, and once you start the process you can't stop it? I don't even see the logic of fighting this even if you add another 10% for workers comp cost. (Unless the tax preparer were the one who made the mistake of advising the client to do this in the first place, in which case you're probably going to have to do the work for free).

[OldJack]

>> I don't even see the logic of fighting this<<

I would do it for a client for zero fee (and have) and that client would be my client forever. That is much more valuable than advertising.

[kcjenkins]

Well, Jack, I have done it for free WHEN I TRULY BELIEVED THE CLIENT WAS CORRECT. But honesty, this does not sound like one of those times.

[mircpa]

One important aspect for us to distinguish between contractual and employee services is Control. Since TP provides all the materials per spec sheet. I am more inclined towards employer-employee relationship rather than independent contractor.