how do you handle taxes for contracted labor who then becomes an employee?

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  • how do you handle taxes for contracted labor who then becomes an employee?


Answer #1 | 02/01 2014 13:06
If he is doing the same work then he is an employee or not. You cannot go back and forth. If it is different work and you can show that then fine. You really should add the $555 to his w2 and gross up the other numbers.
Answer #2 | 02/01 2014 13:49
Issue a 1099 for the 555, then the W2 for the wages.
Answer #3 | 02/01 2014 13:32
Ask your bookkeeper this question.
Answer #4 | 02/01 2014 14:53
And now your decision just how do you want to do it at this time in your life your are the responsible taxpayer for your business operation at this time in your life and you will have to be ready to accept the consequences of your own decisions at some future time in your life. Hope that you find the above enclosed information useful. 01/02/2014
Answer #5 | 02/01 2014 14:53
I agree with G-Man. Prior to being placed on the payroll as an employee, he was an independent contractor and was paid as such. Therefore, the pay that he received during this time should be reported on a form 1099. Subsequently, he became an employee and payments that he received after being hired as an employee should be reported on his W-2. Do not co-mingle his employee payments with his contractor payments.
Answer #6 | 02/01 2014 22:50
You report the initial $550 of contracted labor on Form 1099-MISC. On Form W-2, you report only what he received for work as an employee.
Answer #7 | 02/01 2014 16:46
Cathi K is not entirely correct. It is NOT uncommon for a person who was originally working as an independent to become an employee. The key here is if the person had the right to refuse the work. You will open a big can of worms if you choose to change his prior pay to W2 wages. You will have to go back and amend ALL returns, federal, state AND unemployment. This will result in late payment penalties and possibly open you to audits. Since he was really working as "day labor" when it was convenient for him, it is fine to issue him a 1099-MISC for the $555. And yes, you CAN issue a 1099 for amounts under $600. The $600 threshold is a minimum reporting requirement. This means you MUST report payments in excess of $600, but MAY include payments under $600.
Answer #8 | 02/01 2014 16:01
Cathi K is right.

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