Can an employee file a Schedule C for work with the same employer? They gave him both a W-2 and a 1099-MISC with box 7 Nonemployee compensation.

[Skylane · Accepted solution]

Your client can't control what the employer does.... I've seen this too many times and have yet to see an employer correct it (that would mean  going back and amending last years payrolls???? good luck..........   bottom line is right wrong or indifferent the 1099 gets reported on sch C and your client gets to pays SE tax. 

[Just-Lisa-Now-]

If its an ex employer, you could go the SS-8 route and request to be classified as an employee and then IRS goes back to the employer for their half of FICA

[IRonMaN]

Sounds like the employer is trying to save some payroll taxes.  What were the 1099 pmts for?

[Shorebird]

Thank you.  I have asked the client to find out as he didn't know what it was for either.

[IRonMaN]

You betcha!

[Shorebird]

My worry was if it is permissible to have both W-2 and 1099 from same employer.  If yes, I can file him a Schedule C and take off the expenses subject to 2%.

[TaxGuyBill]

Most likely, it is NOT permissible.

Although there are some extremely rare situations that would qualify (such as the employer hires the worker as an Independent Contractor for work that is unrelated to his work as an employee), I would say that 99.99% of the time that is not the case.  

You need to find out why there are payments on the 1099-MISC.  The employee should ask the employer about it, and assuming it is incorrect, the employee should ask the employer to correct it.  If it is incorrect and the employer refuses to correct it, the proper way to file it is to use Form 8919.

[rbynaker]

There are cases where this is fine.  Before I started my business, I had an employer.  After I started my business I had a client.

[TaxGuyBill]

Except the OP said the client did not know what the 1099 was for.   :smile:

[Shorebird]

TaxGuyBill Thank you so much.  This is very helpful.  I have asked my client to find out what the payment was for.   Also thanks  to rbynaker but that is not the case.

[IRonMaN]

Sometimes these things can boil down to how big of a stink does the client want to make with his employer.  Out of curiosity, how much are we talking here?

[dd4vols]

I have seen a couple of situations where a nurse, etc might work the regular day job inserting needles and generally causing pain and suffering, but then provide a cleaning service at night like once a month....

[Happy-Tax]

Ddvols gives an example of a scenario that I've seen several times over the years (W-2 secretary during the day; 1099 occasional cleaning person at night). That's perfectly legit.

Form 8919 coupled with Form SS-8 would be the recourse if the employer has been playing fast and loose with the employer/employee relationship. Three considerations: (1) As someone pointed out, it had better be an ex-employer because filing those forms essentially puts the employer on report with the IRS. (2) Make sure the client knows that if he wins, once all the dust settles he will save only about 7.65% of the amount (or "profit") on the 1099, so he should consider carefully the pro's and con's of lighting the SS-8/Form 8919 fuse. (3) Having lit the fuse, there is no guarantee that the IRS will ultimately side with the employee over the employer, although admittedly the IRS goes into the decision leaning towards an employer/employee outcome versus an independent contractor result. I've handled only a handful of these cases, but in every case, the IRS ruled in favor of the employee.

Finally, I didn't follow Shorebird's "take off the expenses subject to 2%" comment. I might be missing something here.

[qbteachmt]

This would never fly in my State: "(W-2 secretary during the day; 1099 occasional cleaning person at night). That's perfectly legit."

First, unless the person has a cleaning business and cleans at other locations, too, and is using their own supplies and tools, then all you have is an employee with multiple tasks or duties. Next, our Worker Comp service is run by the State, and they have issued guidance on this specific subject, that you have no way to show "when" the person hurt their back while on the job, no matter what worker classification someone tries to apply to justify a 1099-Misc along with a W2.

It's not unusual to issue a 1099-Misc for box 1 rent to a mechanic with their own tools or a trucker for the use of the truck or renting their fifth-wheel trailer for on the job needs. You also see 1099-Misc for lawsuit settlements. It's pretty easy for the person to look at their W2 compared to what they know their wages should be, to see if this 1099-Misc is part of it, or in addition to what they expect their gross to be.

[Happy-Tax]

I guess it depends on what state you're in (I'm guessing California or New York) and a lot of additional details that aren't available to us as to how this should be treated. I stand by my answer insofar as how the federal tax return could be constructed.

[Skylane]

I don't think he addressed the change in tax law yet.... @Shorebird ....The others are all correct.... My comments are about the practicality and how I'd handle the situation.....  i certainly would not be taking expenses against sch C if it was supposed to be w2... espeically this year.... unreimbursed bus exp subj 2% is history....