Former Employee w/ 1099MISC

[KBTS]

I have a client who was an administrator with a school district. He retired after the school year ended in June. In the fall, he went back and filled in for someone out on sick leave. School district issued him a 1099-MISC with $6,500 in box 7. He probably should been paid as an employee and issued a W-2, but the district was probably trying to save some money by not putting him on the payroll. I am thinking this needs to go on Sch C and pay SE.

Agree or disagree?

[JON]

He has two choices

dispute the classification with the school or on his return or pay the SE tax.

[thomtax]

Agree with Jon. I had the same situation just last week, only this was a custodian. And they want to add another job, under the same arrangement this year. They pay him on W2 but want to 1099 for two off campus sites they operate.

Money is tight, even for schools, and I am seeing more and more of these schemes trying to save a few bucks.

LT

[KBTS]

He is ready to move on with retired life, so I really do not think he has any interest in fighting with the school district over this. Knowing the district, I doubt he would have any success anyway.

[JohnH]

He just needs to keep this in mind if he accepts another assignment and be sure to try and negotiate an extra 8-10% into his compensation to cover the SE tax.

My wife is a retired return-to-work school employee and after a systemwide RIF, she's now an independent contractor AND she took a 15% pay cut. Works out to about a 23% reduction according to my math, plus she now has to carry liability insurance. She enjoys working and the money is still OK even with the reduction, but as you have all pointed out, it's pretty much a take-it-or-leave-it proposition. There are usually plenty of retirees out there ready to step into these positions.

[DaveO]

Glad to see NE isn't the only state cutting corners. I have a client, a teacher, who administers a certain series of test. She is a full time employee of a district. Other smaller schools have her visit to administer the tests as they don't have enough students to merit an employee. She gets a W-2 from her school and a 1099 Misc to cover the other schools even though she does the exact same work.

[taxea]

I would go through the items that make him an employee with him and see whether they apply. If they do then I would do a substitute W-2 as a way of reporting the employer.

Substitute teachers are, or should be, issued W-2's. If the retired employee, custodian working other locations are subject to the schools control on when they work and how they do the job then they are not independent contractors.

Here retired C&C employees are hired back on contract for 90 days at a time. They actually work almost full-time all year with a few days off between contracts. The purpose of the contract is to enable them to retain their retirement. The departments they work for want them because they are already experienced and "work ready". They are issued a W-2.

You might want to ask the TP to have the school provide you with the tax cite that they believe allows them to do this.

[JohnH]

Yeah, that's a great strategy. Stir up as much trouble as possible just to save him $500 of taxes. Just for good measure, badger the employer with request for tax code cites and by threatening to get them in trouble with the IRS in order to really tick them off. A sure-fire process to be certain he will never have an opportunity to earn another $6,500 with the system, but who's counting? Plus, he will probably never come back to you to get his return filed once he ses all the stink this strategy caused just because you want to be right. Seems like a great plan to me, and a fantastic business-builder...

[RitaB]

Good thread from last year

Agree with JohnH. There's a good thread from last year on this subject:

http://www.thetaxbook.com/forums/showthread.php?t=10494

[Jesse]

Yeah, that's a great strategy. Stir up as much trouble as possible just to save him $500 of taxes. Just for good measure, badger the employer with request for tax code cites and by threatening to get them in trouble with the IRS in order to really tick them off. A sure-fire process to be certain he will never have an opportunity to earn another $6,500 with the system, but who's counting? Plus, he will probably never come back to you to get his return filed once he ses all the stink this strategy caused just because you want to be right. Seems like a great plan to me, and a fantastic business-builder...

And add your cost for the time and trouble and how much do you actually save him for all the grief you are causing him?

[RitaB]

Another good point, Jesse

I will add that am amazed at how ungrateful some people are to have a job and compensation of some sort. (Not saying that is the case with the taxpayer in this thread.)

All the people that wanna whine because of the "man" (employer) oughta go out and start a business. Hire some employees. Buy equipment. Pay for insurance, utilities, commercial buildings, computers, tax software, and read IRS publications all day. Yeah, it's a cake walk.

Oh. Sorry. I lost it a little there, huh?

[taxea]

Yeah, that's a great strategy. Stir up as much trouble as possible just to save him $500 of taxes. Just for good measure, badger the employer with request for tax code cites and by threatening to get them in trouble with the IRS in order to really tick them off. A sure-fire process to be certain he will never have an opportunity to earn another $6,500 with the system, but who's counting? Plus, he will probably never come back to you to get his return filed once he ses all the stink this strategy caused just because you want to be right. Seems like a great plan to me, and a fantastic business-builder...

So we should just let tax cheats get away with it so we can pay their share of taxes?
Who said anything about badgering and threatening....maybe the employer is not aware that what he is doing could get him in trouble....perhaps someone willing to take the time to explain the consequences might be appreciated.

[JohnH]

What in the world are you talking about with this "we can pay their share of the taxes" nonsense? The independent contractor is paying the other half of the SocSec - it isn't costing you & me anything. And it isn't cheating if it's an arm's length transaction such as is the case in this particular situation. Apparently a tax cheat is anyone who doesn't see things exactly the way you do.

Justify it away any way you like, but the only person likely to win in this scenario is the client's next tax preparer - that would be the person whom your client will bolt to after all the dust settles.

[JG EA]

So we should just let tax cheats get away with it so we can pay their share of taxes?
Who said anything about badgering and threatening....maybe the employer is not aware that what he is doing could get him in trouble....perhaps someone willing to take the time to explain the consequences might be appreciated.

As a policeman said one time "It is not your job to teach people how to drive." I think it not our job to police other preparers. For one thing you may be getting a one-sided slant to the story. For another thing confidentiality. For yet another thing it is a requirement by many of the organizations to which we belong to speak well or not at all about fellow preparers.
______________
Just read BB's post - it says it betterl

http://www.thetaxbook.com/forums/showthread.php?p=95144#poststop

[taxea]

you all are just as entitled to your opinion as am I. If you don't agree with me you need not get in a huff about it. I don't about yours. If you don't think my advise has any merit don't take it. It is meant as just another way of looking at an issue and I post based on what is posted while trying not to read anything into the post that isn't clearly stated.

Judge not least ye be judged.