1099 Misc

[S T]

Taxpayer filed a claim with the Labor Board for the Employer not paying wages for correct hours and overtime. Taxpayer prevailed at Labor Board, and the employer was required to give Labor Board the check for the amount.

Employer did not deduct any payroll taxes, and then issued a 1099 Misc - Box 7 for the amount.

Should I calculate the Employee's share of payroll taxes (FICA - Mcare) on that amount and pay through the Tax Return? If so, which form to use?

Or just report the amount on line 21 not subject to SE

Thanks

Sandy

[Koss]

Fica

Is the guy still working for the same company?

Or even if he is not, did he also receive a Form W-2 from the same company for 2011?

If so, you can use Form 8919 to treat the amount as wages, and pay the employee's share of FICA.

If he didn't get a W-2, you can still use Form 8919, but he may have to file Form SS-8.

BMK

[S T]

No longer employed by this employer - Employer has had several Class Action Employee Related issues over the last few years.

T/P received one class action W-2 settlement and a very small W-2 for the hours paid in early Jan 2011 from this employer.

Then is Labor Settlement issued on a 1099 Misc - not an independent contractor situation

Thanks for the form 8919 info.

Sandy

[Koss]

Wait a minute...

Okay, he did get a W-2 for 2011 from the same employer. So he can use Form 8919 without having to file an SS-8. But that may not be necessary.

I have a client that got paid out of class action involving Citibank. Same issue. Failure to properly pay overtime. She is still working there, but I don't think that makes any difference at all.

She got a W-2 and two different Forms 1099-MISC, all from the same payer, with the same EIN. The payer is "Citigroup Class Action Settlement." The big difference is that on both 1099 forms, the amount appears in Box 3.

Both 1099 forms have a notation at the bottom, near the account number, which says "pro-rata attorney fees/expenses."

In your client's case, the law firm or the settlement administrator may have put the data in the wrong box. I don't think your client's payment is subject to FICA.

How much money is it.

I probably wouldn't screw around with Form 8919. I would probably put in on line 21, and attach an explanation. Or not attach an explanation and just handle it reactively if necessary.

BMK

[S T]

No attorney in this case

Here is the income from the same employer

W-2 form- Employer Wages paid in 2011 on W-2 form $ 140.56 (Box 1) - all associated payroll taxes

W-2 form - class Action through Attorney Firm - with associated payroll taxes deducted Wage Box 1 amount $ 92.44

1099 Misc Form from Employer on the Labor Board Settlement - Box 7 - $ 1,920, (and we received two 1099 Misc forms from the Same Employer - one from the local and one from the Parent Company - we are trying to correct that reporting now) T/P did not receive more than the $ 1,920 amount - NO notation's in Account # Block just a ##

Based on conversation with T/P - no attorney involved on the 1099 MISC amount of $ 1,930 - it was a taxpayer dispute claim directly with the Calif Labor Board, the Calif Labor Board collected the check from the Employer, and turned it over to the Taxpayer.

?????

Sandy

[S T]

I think for me the issue I am struggling with, is that I have been involved in Labor Board Hearings on unpaid or underpaid wages due to overtime, etc. And on those that I have been involved with "as Payroll Rep" we have always had to issue a check to Labor Board on behalf of the employee" and they would be the Gross Amount, less any FICA/Mdcare not including any FIT or SIT amounts, then for the Employer I represented we would issue the W-2 at the end of the year reflecting accordingly.

This taxpayer received the check via the Labor Board - as settlement - and no backup or printout of any payroll taxes.

So we do not know whether or not the $ 1,930 was gross Wage amount with no FICA/MCARE and associated State Deductions or not

I would not like to subject the taxpayer to a "duplication" of payroll taxes for Employee only amounts.

Any additional thoughts on how to report this $ 1,930 on the tax return??? I am leaning toward just only line 21 with a note that it was a Labor Dispute Settlement?

Thanks,

Sandy

It is an exercise in "futility" to obtain any more records than what we have available.

The 1099 MISC box 7 is clearly a mis-reporting - however, I do not believe we can have it corrected - as the Employer will not cooperate - obviously due to the multitude of "Wage" legal actions they have against them and been paying out.

[S T]

Okay no more thoughts on this issue, so I should go ahead and tax the T/p via 8919?

Thanks,
Sandy

[S T]

Guess since no more thoughts on this, i will file the 8919, I don't believe it is right to "tag" the employee for the Employee portion of the FICA m/care when it should have been done at the Labor Settlement, but the T/p has no records to provide to confirm or deny - stating the $1,930 was net of

Sandy

[JohnH]

Here's a thought. I liked Koss's suggestion to put it on line 21 with an explanation attached.

Even though the employer paid the money to the FTB, the fact remains that the payment came from the Labor Board, which is not the employer. So why not treat it in the same manner as a "SPIFF"? Report it on line 21 and omit the S/E tax or employee SocSec/FICA - the explanation probably won't be read anyhow, but at least you've disclosed what you're doing.

If I took this approach, I would only do this after briefing the client, being sure they understood the issue, and they are in agreement. Seems to me the worst thing that could happen would be a bill for $110 (plus a little P&I) within a couple of years. And I think there's a valid basis for treating it this way, in spite of the Line 7 reporting on the 1099MISC.