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Section 530 Revenue Act of 1978

Forum|Forum|6 years ago
May 6, 2020
15 replies
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Has anyone dealt with income reported on a 1099 MISC where the company provided the individual with a memo stating they were a "Statutory Employee Sales Representative" and the IRS entitled the company with relief under Section 530 Revenue Act of 1978?

This started out as a conversation between a group of friends but turns out there is an actual situation.

2 of us in the group thought all Statutory Employees had to be paid on a W-2 and the other 2 in the group say that if it falls in one of 3 categories it can be paid on 1099 but independent statutory employee is responsible for their 1/2 of FICA

Any tie breaker thoughts out there?

ProSeries Professional

This topic has been closed for replies.

Best answer by qbteachmt

Here is the IRS article that covers this, including your "one of 3 categories" explanation, and the use of 1099 is here, as well:

https://www.irs.gov/government-entities/worker-reclassification-section-530-relief

Here's a nice article for statutory employee and statutory non-employee (independent contractor):

https://www.symmetry.com/payroll-tax-insights/statutory-employees-vs.-statutory-non-employees

And here's an article that seems to explain your comment about "they pay their own half:"

https://www.thetaxadviser.com/issues/2010/dec/zimmerman-dec10.html

All of this relies on the facts and circumstances for the specific situation.

Just-Lisa-Now-

Intuit Community Champion

If its on a 1099, and the employee pays their half of SS/Mdcr who pay the other half and how..since both halves will be computed on the Sch C profit?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

T

TiredFarmerAuthor

Level 6

Since the other 3 of us have found out it is a real situation we have tried to find out what the whole story is from the company but have not been able to due to "Covid 19". The company is Marchon Eyeware and they seem to be a large company and was hoping maybe someone else maybe had this situation and knew more than the client has been able to try and explain.

qbteachmt

Level 15

Didn't you already have a topic with Marchon where we were contributing? Is this a Duplicate?

Don't yell at us; we're volunteers

T

TaxGuyBill

@TiredFarmer wrote:
Has anyone dealt with income reported on a 1099 MISC where the company provided the individual with a memo stating they were a "Statutory Employee Sales Representative" and the IRS entitled the company with relief under Section 530 Revenue Act of 1978?

When did this "memo" come? Was is significantly after the 1099-MISC was issued? Or was in issued in connection with the 1099-MISC?

T

TiredFarmerAuthor

Level 6

They said it was given when they were talking about their tax debt among each other.

T

TaxGuyBill

@TiredFarmer wrote:
They said it was given when they were talking about their tax debt among each other.

Without much context, this is how I interpret that "memo":

The client is a Statutory Employee, and should be filing as such (including Form 8919 to pay Social Security and Medicare if there is no W-2). They employer was erroneously treating them as Independent Contractor, but they were provided "relief" from the IRS via 530 so the IRS won't retroactively make the employer fix things. But the client is still a Statutory Employee and should be filing as such.

qbteachmtAnswer

Level 15

Here is the IRS article that covers this, including your "one of 3 categories" explanation, and the use of 1099 is here, as well:

https://www.irs.gov/government-entities/worker-reclassification-section-530-relief

Here's a nice article for statutory employee and statutory non-employee (independent contractor):

https://www.symmetry.com/payroll-tax-insights/statutory-employees-vs.-statutory-non-employees

And here's an article that seems to explain your comment about "they pay their own half:"

https://www.thetaxadviser.com/issues/2010/dec/zimmerman-dec10.html

All of this relies on the facts and circumstances for the specific situation.

Don't yell at us; we're volunteers

L

LaceeTheEA

Level 2

I have a couple new clients this year that are also Marchon employees and have been digging into this all day. How did you end up reporting this?

T

TiredFarmerAuthor

Level 6

We helped a friend look for weeks and our group or the Marchon "Employee" could not get anything in writing for back up as a statutory employee.

According to everything the client had and according to IRS guidelines they report on Schedule C.

L

LaceeTheEA

Level 2

Thanks for your reply!

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