Section 530 Revenue Act of 1978

[TiredFarmer]

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?

[Just-Lisa-Now-]

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?

[TiredFarmer]

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]

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

[qbteachmt]

I found the first one, already running, here:

https://proconnect.intuit.com/community/proseries-discussions/discussion/section-530/01/83016#M46588

No need to keep starting over.

[TiredFarmer]

Sorry was not intentional.  Didn't know it was a real situation when I first asked for thoughts.  And I do appreciate the input despite my posting "wrong".

[TaxGuyBill]

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@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?  

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

[qbteachmt]

What's "wrong" is that you now have your Volunteer peer users trying to help you in both places, and they would not see you already got some help, so you just made more work for Volunteers.

[TiredFarmer]

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

[TiredFarmer]

And to the what's "wrong" person.....you have no idea of what my situation is and I pray you never have to walk a mile in my current shoes and this is not the place to explain it...I made an error and I apologize if some one wants to share how to delete one of them I will gladly do because I tried and it did not work.  To those of you showing your patience and giving volunteer help I really do appreciate it!

[TaxGuyBill]

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@TiredFarmer wrote:

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

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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.

[qbteachmt · Accepted solution]

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.

[LaceeTheEA]

So angry

[LaceeTheEA]

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?

[TiredFarmer]

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.

[LaceeTheEA]

Thanks for your reply!