Leased Employee and Commissions

[cientax]

I have a new client that used an employee leasing company and he used a worker as a commissioned worker. The leasing company paid the employee for the hours worked but my client also paid him commissions for his sales. My client (not me) reported the commissions as nonemployee compensation on Form 1099 in 2004 & 2005. The employee filed an SS-8 with the IRS and the IRS determined that he was also an employee of my client even though he was hired through the employment agency and IRS is now requiring my client to pay the employment taxes that were not withheld or paid and to file the 941c's.

Can someone give me the code section(s) where it states that commissions on sales are considered wages? I always "THAWT" that commissions were subject to SE tax and considered Self Employment income. Have I bean wrong for the last 20 years?

* My client has a concrete construction company and he had the worker find new jobs for the company. Not selling anything other than promoting the company and getting new jobs and would get paid a commission based on the dollar amount of each job.

[RoyDaleOne]

Will you are right that you have been wrong.

If commissions is not considered wages I would pay all employees commissions and have no payroll taxes.

31-3121(a)-1

© The name by which the remuneration for employment is designated is

immaterial. Thus, salaries, fees, bonuses, and commissions on sales or on

insurance premiums, are wages if paid as compensation for employment.

[lydia33]

If commissions were paid to an employee they are subject to all the payroll taxes. Pub. 15 2008 pd 14

[lbbwest]

I have a new client that used an employee leasing company and he used a worker as a commissioned worker. The leasing company paid the employee for the hours worked but my client also paid him commissions for his sales. My client (not me) reported the commissions as nonemployee compensation on Form 1099 in 2004 & 2005. The employee filed an SS-8 with the IRS and the IRS determined that he was also an employee of my client even though he was hired through the employment agency and IRS is now requiring my client to pay the employment taxes that were not withheld or paid and to file the 941c's.

Can someone give me the code section(s) where it states that commissions on sales are considered wages? I always "THAWT" that commissions were subject to SE tax and considered Self Employment income. Have I bean wrong for the last 20 years?

* My client has a concrete construction company and he had the worker find new jobs for the company. Not selling anything other than promoting the company and getting new jobs and would get paid a commission based on the dollar amount of each job.

Unless I am reading your post incorrectly the barn door is closed. When I take a position regarding employee versus I file the SS-8; I was under the impression that the SS-8 WAS the determination.

[jainen]

>>IRS is now requiring my client to pay the employment taxes <<

And when the IRS gets through, they will refer him to the state employment development office, who will audit ALL his workers for all years to assess unemployment insurance with penalty and interest. State income tax too, and don't even THINK about what happens if the leasing company finds out he was paying their client for additional work while still under contract. He needs to have a specialist in employment tax representation review his case immediately.