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need tax advice as my old job changed me from a W2 employee to a 1099 employee without my knowledge.

I

iowahaha1

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Apr 15, 2015
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Need some true help from this message board here

About 2 months ago, my company brought me in and I thought they were going to let me go from my sales job, instead they gave me a pay cut. I had another job lined up, but it would take a couple of months till they were ready to bring me on board. So for 2 months I rode the job out with a pay cut till the new job opened, which I have now.

I just got my tax report back from them and they paid me as a 1099 when I took the pay cut. To my fault I never looked at my electronic pay stub (as you have to go to an external site), I just looked at my automatic deposits. So what do I do now?

I am guessing I will request my pay-stubs. Since I no longer work for this company I have no access to their computer system to access them. I usually file my own taxes with my wife so I will have to find out what forms to get to pay 1099 taxes. Since I didn't know I was a 1099 employee I did not keep track of my car mileage that I drove. One question for you is can a company just change you from a W2 to a 1099 without your knowledge? In hind sight, I would have made more money if they would have fired me and I collected unemployment.

A little help here would be appreciated.
 
As a 1099, you're a contractor and not an employee, which means you're responsible for paying all your own taxes, and on your own for benefits, etc. It seems odd that they would transition you and you wouldn't know anything about it (for example, they would no longer cover health insurance).

Not sure of the legal ramifications.
 
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If the timing of the transition was before year end, you should have received both a W-2 and a 1099 for your work in 2023. If you did, then you’ll have some amount of self employment income and you will owe a somewhat higher amount of taxes on that income but you’ll also be entitled to a couple deductions you don’t normally take.

1. If you are using tax prep software like turbo tax, it will guide you through the process.

2. If you typically withheld enough from your paychecks to allow for a small refund at tax time (I’m not endorsing that, mind you), then you’ll probably just not have much of a refund this time around because it will get eaten up by the additional taxes.

This is all assuming that you were only a 1099 “contractor” for a short amount of time in 2023.

Not sure of the legal ramifications of what they; it really sucks to just be finding this out now though. Good luck.
 
So, based on what you said: You should have gotten two tax forms from them:
1. A W-2 that has your employee wages with the various tax withholdings for all but the last two months; and
2. A 1099 which has the amount you were paid as an independent contractor.

You really don't need the "pay stubs" for the 1099 stuff because it won't have anything on it. You will need to fill out a Schedule C (Profit or Loss on Business) on your tax return. As a poster above said, you may have some expenses that are deductible against the 1099 income.

Unfortunately, you will owe taxes on this income which has not been withheld by the "employer".

As another poster mentioned above, "It seems odd that they would transition you and you wouldn't know anything about it (for example, they would no longer cover health insurance)."

Assuming this all happened as you say, the company may well be applying the law incorrectly and you should have still been an employee, rather than a contractor. But, I suspect the time and legal expense on you chasing them is not worth your time and money. So, unfortunately, you need to calculate and pay your taxes on this 2 months of income and take this as a lesson learned for the future.
 
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MarkRules said:
Assuming this all happened as you say, the company may well be applying the law incorrectly and you should have still been an employee, rather than a contractor. But, I suspect the time and legal expense on you chasing them is not worth your time and money. So, unfortunately, you need to calculate and pay your taxes on this 2 months of income and take this as a lesson learned for the future.
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Here's my question: A 1099 means he was a contractor and not employee, so he was effectively "laid off" from his job as an employee. Shouldn't he have received proper notice and been entitled to unemployment, COBRA, etc.?

Need a legal eagle like Slippin' @Jimmy McGill to weigh in here.
 
I think you could get them crucified with the Department of Labor if you wanted to, for failure to make this change clear.

For example, did they notify you of your COBRA rights (if you had health insurance through them)? Other requirements of terminating an employee?

This was sleazy, or at least incompetent.
 
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OP, was your pay higher once you became a 1099? If so, shouldn’t that have told you something wasn’t right with your situation with your employer as an employee or contractor? Sounds messed up and did they switch you because you don’t take their insurance and told them you were leaving for another sales job by giving them two months notice?
 
OutbackBowl2017 said:
OP, was your pay higher once you became a 1099? If so, shouldn’t that have told you something wasn’t right with your situation with your employer as an employee or contractor? Sounds messed up and did they switch you because you don’t take their insurance and told them you were leaving for another sales job by giving them two months notice?
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He took a pay cut and remained on the job. Without access to paystubs it would have been difficult for him to know he was making more with decease job title pay. As someone stated above it appears to me more as if they fired him in their minds. Clever way to avoid any of those costs.
 
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OP, you should gather all correspondence and possibly have a meeting with the Department of Labor once you figure out exactly what your employer sent you via emsil, mail, and any other correspondence as they should of had a sit down meeting with you to discuss the change from employee to 1099 status. Sounds like you made the right move to leave them.
 
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How does one not realize they are 1099? Did you ever look at a pay stub? How would you not see any taxes/insurance coming out? So many questions. And being 1099 is waaaaay better than W2. I'm W2 at my current sales job and it sucks ass.
 
OutbackBowl2017 said:
OP, you should gather all correspondence and possibly have a meeting with the Department of Labor once you figure out exactly what your employer sent you via emsil, mail, and any other correspondence as they should of had a sit down meeting with you to discuss the change from employee to 1099 status. Sounds like you made the right move to leave them.
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Referring to my original response: I agree with this if he wants to take this on as a moral cause, and assuming what he has told us is generally correct.
My advice would be to not pursue this because it will take a lot of time, money and frustration to do so. This also assumes that his income for the two months was not real high and that the resulting tax liability is something he can handle.
I just don't want him to spend 6 months chasing a few dollars.

I definitely agree that it was the right move to leave.
 
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Derekd3408 said:
How does one not realize they are 1099? Did you ever look at a pay stub? How would you not see any taxes/insurance coming out? So many questions. And being 1099 is waaaaay better than W2. I'm W2 at my current sales job and it sucks ass.
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It was his understanding that he was receiving a pay cut. If everything is direct deposit. You wouldnever need to come in contact with a pay stub.
 
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MarkRules said:
Referring to my original response: I agree with this if he wants to take this on as a moral cause, and assuming what he has told us is generally correct.
My advice would be to not pursue this because it will take a lot of time, money and frustration to do so. This also assumes that his income for the two months was not real high and that the resulting tax liability is something he can handle.
I just don't want him to spend 6 months chasing a few dollars.

I definitely agree that it was the right move to leave.
Click to expand...
If, it’s generally correct I would still contact the Department of Labor. Chances are he isn’t the first or last guy they’ve done this too.
 
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Derekd3408 said:
Ummm, what? I'm direct deposit and look at every single pay stub. It's emailed to me. If he is in sales, you look at your pay stubs to make sure everything is paid out correctly.
Click to expand...
Agreed he messed up by not looking at his pay stubs. But the point remains there should be a solid string of dialogue about the switch to 1099. That’s a major no no if just occurs without warning.
 
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tumorboy said:
Agreed he messed up by not looking at his pay stubs. But the point remains there should be a solid string of dialogue about the switch to 1099. That’s a major no no if just occurs without warning.
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I won't argue that at all. That's shady AF, but if you are in sales and don't realize you've been switched to 1099, I can't feel the least bit sorry for you. I take an hr to go through my pay stub and make sure every commission is paid properly. You would be shocked how often mistakes are made. I would notice instantly taxes weren't being deducted and have a email off to HR.
 
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MarkRules said:
Referring to my original response: I agree with this if he wants to take this on as a moral cause, and assuming what he has told us is generally correct.
My advice would be to not pursue this because it will take a lot of time, money and frustration to do so. This also assumes that his income for the two months was not real high and that the resulting tax liability is something he can handle.
I just don't want him to spend 6 months chasing a few dollars.

I definitely agree that it was the right move to leave.
Click to expand...
I’d let the employer know that I’m contacting the DoL if they truly didn’t communicate properly with him as to the change and they can treat it as a threat or however they want to view it as a way to get the pay he was shorted back.

In my view they did all this as retribution if he told them he was leaving as payback or they are so dumb as a company that they made these changes not realizing he is allowed to receive benefits as an unemployed employee. All this said, sounds like a place not to work with how they treat employees.
 
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Derekd3408 said:
Ummm, what? I'm direct deposit and look at every single pay stub. It's emailed to me. If he is in sales, you look at your pay stubs to make sure everything is paid out correctly.
Click to expand...

At the very least you check out your first pay stub after the change,.. just to confirm what's going on.
 
Figure what you owe and pay it. If you were only 1099 for a short time, your mileage probably won't make any difference anyway. You have to come up with more deductions than the standard deduction for it to be beneficial to itemize. Just figure out what you owe, pay it, and move on. There's no viable option that doesn't result in you paying what is owed.
 
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HawkinK.C.1 said:
Figure what you owe and pay it. If you were only 1099 for a short time, your mileage probably won't make any difference anyway. You have to come up with more deductions than the standard deduction for it to be beneficial to itemize. Just figure out what you owe, pay it, and move on. There's no viable option that doesn't result in you paying what is owed.
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Definitely agree he should just go ahead and pay. But still wouldn’t let the former employer off the hook without giving them a Department of Labor headache.
 
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Derekd3408 said:
I won't argue that at all. That's shady AF, but if you are in sales and don't realize you've been switched to 1099, I can't feel the least bit sorry for you. I take an hr to go through my pay stub and make sure every commission is paid properly. You would be shocked how often mistakes are made. I would notice instantly taxes weren't being deducted and have a email off to HR.
Click to expand...

Our sales guys always noticed every dollar they were short.

Of course, they never seemed to mention anything when payroll made an error in their favor..
 
Formerly Rockymtnole said:
Our sales guys always noticed every dollar they were short.

Of course, they never seemed to mention anything when payroll made an error in their favor..
Click to expand...
And why would they? I do the same. I figure it's the companies job to figure out that error. I'm not going to spend an hour on Sunday to lose money.
 
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