W-2 and 1099-MISC....How can this be???!!!

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  • taxpronewbie
    Junior Member
    • Mar 2009
    • 3

    #1

    W-2 and 1099-MISC....How can this be???!!!

    I have a client who is a Real Estate Consultant...i was preparing his return (Sch E, Sch SE, Sch C, etc..) when inputing his W2's i noticed a 1099 MISC with an amount under
    box 7 non-employee compensation...which tells me this was some form of commision....
    when i questioned the client so see if he was no longer with the mortgage company...and operating as an LLC (which was with the recipients' name on th 1099MISC)...he stated to me he is still with the organization????....he informed me he operates/oversees branch
    offices for his current employer in which he is reimbursed based on sales production....


    my question is????.....how do i handle this....he cannot receive a W2 and a 1099MISC....is this his employers' way of avoiding payroll, soc sec,and medicare taxes
    based on his commissions...my client had told me his employers' accounting dept told
    him to create an LLC for himself...without giving him a reason why.....should i have my client produce a new W2 with the commisions included....or how would i handle this
    delicate situation?????.....


    please help......
  • RitaB
    Senior Member
    • Jul 2008
    • 1382

    #2
    It happens

    I have seen people get both a 1099 and a W-2 from the same payer. Who issued the form is irrelevant. The type of work a person does and the manner performed can certainly vary during a given year. Just do the return correctly without regard to your feelings about why the employee also had sub-contractor type pay from the same payer. Complete the Sch C and deduct applicable expenses.

    Was employer avoiding payroll tax? Yeah, probably, and the worker cashed the checks. He's still working there, so I wouldn't stir the stew, so to speak.

    Too late to form an LLC after it's all "gone down." (I really do not see why that would help anyway.) Also, I assume your client's SSN is on the 1099, so I don't see how the name being wrong will be a factor at all.

    Don't sweat this. You can't save 'em all, Hasselhoff.

    (I've always wanted to say that.)
    If you loan someone $20 and never see them again, it was probably worth it.

    Comment

    • BHoffman
      Senior Member
      • Feb 2008
      • 1768

      #3
      Agree with RCooper. I've seen stuff like this too. The employer is taking the risk.

      Comment

      • RitaB
        Senior Member
        • Jul 2008
        • 1382

        #4
        Right, and who knows?

        Originally posted by BHoffman
        The employer is taking the risk.
        Maybe the employer completed the forms correctly. Maybe the worker really was a sub-contracter for the compensation included on the 1099.

        I never worry about whether the person should have been an employee. It's done, and the worker agreed to the situation (maybe without a clue) by accepting the compensation.

        I could have had the salad. I didn't, but I'm not going to turn in the restaurant now because the lasagna was not in my best interest.

        I realize that makes no sense. Best I can do right now.
        Last edited by RitaB; 03-18-2009, 11:27 AM.
        If you loan someone $20 and never see them again, it was probably worth it.

        Comment

        • Edsel
          Senior Member
          • Feb 2008
          • 238

          #5
          Lasagna?

          Cooper, you're losing it.

          But I agree entirely with everything you said. This practice used to be very commonplace among auto dealerships - they had what they called a "December promotion" of sorts and they would pay salesman commissions/bonuses and put them all on a 1099.

          Their rationale was that the promotions were "over and above" their routine compensation plan. Doesn't really make sense, and all the sophisticated explanations amounted to no more than just a bonus like anyone would pay.

          We can't save the world, can we? Whatever is "wrong" here is the problem of the employer. A 1099 and W-2 to the same person in the same year would appear to be a red flag if IRS is still in the business of auditing payroll.

          Comment

          • RitaB
            Senior Member
            • Jul 2008
            • 1382

            #6
            I THOUGHT I was losing it

            Glad to know I was right about that...

            My pastor says salad is what food eats.
            If you loan someone $20 and never see them again, it was probably worth it.

            Comment

            • DaveO
              Senior Member
              • Dec 2005
              • 1453

              #7
              IMHO one of the worse offenders here are the school districts. We have ESU's (Educational Service Units) which cover several schools and perhaps several school districts. They provide purchasing assistance and administrative resources to the member schools. I often see cases where a teacher with some special skill set such as doing student evaluations will be paid by the ESU on a 1099 misc for performing these services for schools other than their own within the ESU. After seeing this for a couple years I asked the teacher why they didn't follow the rules and she said the ESU told her they weren't set up for payroll. I wonder how that excuse would fly for the roofer or painter in a payroll audit?
              In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
              Alexis de Tocqueville

              Comment

              • Black Bart
                Senior Member
                • Jun 2005
                • 3357

                #8
                No problem.

                ...he cannot receive a W2 and a 1099MISC...
                People can and do receive both forms all the time. Right, wrong, whatever, that's all immaterial -- your job is simply to deal with the documents you have. Besides, they're far more at risk during a state employment security department payroll audit (or an insurance company premium audit) than they are from IRS.

                Originally posted by taxpronewbie
                ...my question is????...how do i handle this delicate situation?????......
                It's not really a delicate situation. Just put the 1099 on a C-EZ and forget it -- it will handle itself. You won't hear anything back from anybody except maybe the taxpayer griping about the SE tax.

                Comment

                • BHoffman
                  Senior Member
                  • Feb 2008
                  • 1768

                  #9
                  You could feed them to our 1099 enforcement squad leader.

                  Last edited by BHoffman; 03-18-2009, 03:40 PM.

                  Comment

                  • Lion
                    Senior Member
                    • Jun 2005
                    • 4699

                    #10
                    Clothing

                    They seem to be wearing a lot more clothing in Hawaii back then than I see on TV programs now, especially the girl running on the beach and the nightclub (hula) dancer. Nowadays, the female police officers/CSIs/etc. show more cleavage than on that opening in warm, sunny Hawaii. Even the shows set in chilly NY or Philly have their actresses in skimpier clothing.

                    Comment

                    • luke
                      Senior Member
                      • Dec 2008
                      • 437

                      #11
                      To B Hoffman

                      I Love It - Thanks!

                      Comment

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