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Why did I receive a 1099?

Receiving a 1099 means your employer treated you as an independent contractor rather than an employee. Is this the first year you have received a 1099 instead of a W-2?

Tax time can be more complicated with a 1099. You are required to pay self employment taxes - employee and employer portions of Social Security and Medicare along with income taxes. Failing to make estimated taxes could lead to penalties and interest that can quickly increase the amount you owe.

Since we are already in the month of April, you need to act quickly. First, check with your employer. Then, request an extension to avoid the failure to file penalty.

Misclassification issues

Did you start a new job last year with the assumption you were an employee? If the 1099 form was a surprise, you need to check with your employer. There may have been a misunderstanding.

The rules distinguishing an employee from an independent contractor are complicated. In general, if the company you worked for controlled your hours, how you did the work and provided benefits, you may have been misclassified.

Cutting labor costs; harming workers

Misclassifying employees is often a tactic used to cut labor costs. A company may misclassify workers by out sourcing activities through subcontractors, temporary agencies or third-party management.

United States Department of Labor investigations last year targeted industries, including:

  • Food service
  • Day care
  • Hospitality
  • Janitorial and cleaning services

Often these issues arise in the construction industry as well. The Wage and Hour Division has also partnered with many states to effectively address the problem. Last year, the federal agency obtained more than $74 million in back wages for 102,000 workers.

If you fear you were inappropriately labeled a contractor, seek legal help from an experienced attorney at the Silver Tax Group. There could be remedies that will lower your tax bill.

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