Form 1099 and Worker Classification Issues

1. Introduction
2. What’s New 00:01:02
3. 1099-NEC - The Form 00:16:03
4. 1099-NEC - Reportable Payments 00:24:23
5. 1099-NEC - Backup Withholding 00:27:01
6. 1099-NEC - Examples of Reportable Payments 00:30:45
7. 1099-NEC - Expense Reimbursements/Accountable Plans 00:32:49
8. 1099-NEC - Difference Between Expense Reimbursements and Fringe Benefits 00:35:35
9. 1099-NEC -Non-Taxable Fringe Benefits 00:37:24
10. 1099-MISC - The Form 00:38:42
11. 1099-MISC - Rent 00:40:36
12. 1099-MISC - Special Form 1099-S Issue 00:41:50
13. 1099-MISC - Royalties 00:42:30
14. 1099-MISC - Medical Services 00:43:43
15. 1099-MISC - Box 12 and Box 15 00:44:46
16. IRS Form 1099-K 00:48:28
17. IRS Form 1099-R 00:50:45
18. IRS Form 1099-INT 00:52:18
19. IRS Form 1099-B 00:53:58, 00:57:11
20. IRS Form 1099-DIV 00:56:42
21. IRS Form 1099-C 00:57:21
22. The W-9 00:59:14
23. Worker Classification and What’s New – Federal Level 01:03:14
24. Overview: What’s New in State Employee Versus Contractor Issues 01:16:50
25. Determination of Worker Status 01:24:15
26. Consequences of Misclassification - Penalties 01:27:22
27. Consequences of Misclassification - State Unemployment Tax 01:27:35
28. Definitions Matter 01:27:53
29. Common-Law Employee -  Income and Federal Taxes 01:26:36
30. Common-Law Employee -Behavioral Control/Financial Control 01:31:14
31. Behavioral Control 01:31:16
32. Financial Control 01:31:34
33. Type of Relationship 01:31:55
34. Statutory Employees - Independent Contractors 01:32:43
35. Statutory Employees - Drivers, Insurance Agents, and Salespersons 01:32:54
36. Statutory Nonemployee 01:33:26
37. Independent Contractor 01:34:4:13
38. Safe Harbor Provisions 01:34:22
39. Safe Harbor Provisions - Reasonable Basis 01:35:18
40. Safe Harbor Provisions - Excluded from Section 530 Relief 01:35:47
41. How the Issue Arises 01:36:42
42. Federal – State Information Sharing - The Questionable Employment Tax Practices Memorandum 01:39:11
43. Federal – State Information Sharing - Active Participants 01:33:18
44. Voluntary Classification Settlement Program (VCSP) - Basic Premise 01:39:28
45. Voluntary Classification Settlement Program (VCSP)  - Pros and Cons 01:40:2
46. Protect Yourself 01:40:55
47. Attendee Questions 01:41:57
48. Presentation Closing 01:45:05

• 

  Steven Mercatante

  Steven Mercatante is the principal and founder of TIR Consulting, LLC. He is a nationally recognized leader in tax reporting education and consulting on specialized compliance issues. He has conducted on-site consultation for corporate clients from across the world and led countless seminars and web [...]

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• Accountable Plan 00:33:10
• Audit 00:02:10, 00:14:24, 01:15:36, 01:39:02
• Backup Withholding 00:27:04
• B-Notice 00:30:18
• Common-Law Employee 01:24:15, 01:28:35
• Contract 01:32:02
• DBA -Doing Business As 01:02:39
• De Minimis 00:36:04
• Department of Labor (DOL) 01:06:05, 01:10:01, 01:15:13, 01:39:24
• Disregarded Entity 01:00:00, 01:02:49
• Exempt 01:26:01
• Expense 00:33:24, 01:31:40
• Expense Reimbursement 00:31:25, 00:32:50
• Fair Labor Standards Act (FLSA) 01:10:11
• Federal Insurance Contributions Act (FICA) 00:35:35
• Federal Unemployment Tax Act (FUTA) 00:35:35
• Form 1099-B 00:53:59
• Form 1099-C 00:57:21
• Form 1099-DIV 00:19:44, 00:32:02, 00:56:42
• Form 1099-INT 00:32:04, 00:52:18
• Form 1099-K 00:48:29
• Form 1099-MISC 00:18:13, 00:21:30, 00:29:57, 00:38:42, 00:56:56
• Form 1099-NEC 00:16:08, 00:29:52, 00:42:27
• Form 1099-R 00:19:37, 00:31:53, 00:50:47
• Form 1099-S 00:32:10, 00:42:11
• Form 8952 01:39:44
• Form 945 00:30:39
• Form W-9 00:27:13, 00:59:14, 01:02:11
• Fringe Benefits 00:33:42,  00:35:36
• From W-2 00:32:27, 00:37:01
• Independent Contractor 00:31:26, 01:03:49, 01:07:39, 01:11:47, 01:26:45, 01:34:16
• Invoice 00:27:31
• IRC Sec. 3406(a) 00:27:25
• IRC Sec. 6041(a) 00:01:02
• IRC Sec. 6109(a)(2) 00:27:17
• IRC Section 132 00:35:52
• IRC Section 409A 00:45:47
• Limited Liability Company (LLC) 01:00:02
• Minimum Wage  01:27:35
• Nonqualified Deferred Compensation (NQDC) 00:19:30, 00:45:14, 00:56:52
• Overtime 01:06:24
• Reasonable Cause 00:09:06
• Safe Harbor 01:34:22
• Section 530 Relief 01:35:47
• Sole Proprietor 00:59:59, 01:02:42
• Statutory Employee 01:04:04, 01:24:15, 01:32:43
• Statutory Nonemployee 01:04:05, 01:24:15, 01:33:26
• Tariff 01:24:20
• Tax Gap 00:02:36
• Tax Shelter 01:01:05
• TIN 00:27:21, 00:28:59
• Transaction 00:48:42
• Vendor 00:25:45, 00:30:08

Accountable Plan: An accountable plan is a plan that follows the Internal Revenue Service (IRS) regulations for reimbursing workers for business expenses in which reimbursement is not counted as income. ... However, these expenses must be business-related to fall under an accountable plan.

Audit: A formal examination of an organization's or individual's accounts or financial situation

B-Notice: A notice from the IRS stating that one or more tax ID numbers were missing from a 1099 or do not match the IRS records.

Backup Withholding: Backup withholding is the tax that is levied on investment income, at an established tax rate, as the investor withdraws it. Backup withholding helps to ensure that government tax-collecting agencies (such as the IRS or Canada Revenue Agency) will be able to receive income taxes owed to them from investors' earnings. (www.investopedia.com)

Common-Law Employee: A common-law employee is a worker whose employer has the right to control what work they do and how they do it. This constitutes the traditional employer-employee relationship. This distinction is crucial as it carries significant implications for both employers and workers regarding tax obligations, legal responsibilities, and access to benefits.

Contract: A written or spoken agreement, especially one concerning employment, sales, or tenancy, that is intended to be enforceable by law.

DBA -Doing Business As: Sometimes it makes sense for a company to do business under a different name. To do this, the company has to file what's known as a DBA, meaning "doing business as." A DBA is also known as a "fictitious business name," "trade name," or "assumed name."

De Minimis: Too trivial or minor to merit consideration.

Department of Labor (DOL): The United States Department of Labor is a cabinet-level department of the U.S. federal government responsible for occupational safety, wage and hour standards, unemployment insurance benefits, reemployment services, and some economic statistics; many U.S. states also have such departments.

Disregarded Entity: A disregarded entity refers to a business entity with one owner that is not recognized for tax purposes as an entity separate from its owner. A single-member LLC ( “SMLLC”), for example, is considered to be a disregarded entity. (www.pntax.com)

Exempt : Exempt employee is a term that refers to a category of employees set out in the Fair Labor Standards Act. They do not receive overtime pay, nor do they qualify for the minimum wage

Expense: Offset (an item of expenditure) as an expense against taxable income.

Expense Reimbursement: Expense reimbursement is a method for paying employees back when they spend their own money on business-related expenses. These expenses generally occur when an employee is traveling for business but can occur in other work-related situations. (www.thebalancecareers.com)

Fair Labor Standards Act (FLSA): The Fair Labor Standards Act of 1938 29 U.S.C. § 203 is a United States labor law that creates the right to a minimum wage, and "time-and-a-half" overtime pay when people work over forty hours a week. It also prohibits most employment of minors in "oppressive child labor".

Federal Insurance Contributions Act (FICA): The Federal Insurance Contributions Act is a United States federal payroll contribution directed towards both employees and employers to fund Social Security and Medicare—federal programs that provide benefits for retirees, people with disabilities, and children of deceased workers.

Federal Unemployment Tax Act (FUTA): The Federal Unemployment Tax Act (FUTA) is a federal law that imposes an unemployment tax on employers. The FUTA tax funds the federal government's oversight of each state's unemployment program. Only employers pay FUTA tax. You must deposit the tax quarterly and file an annual form.

Form 1099-B: Proceeds From Broker and Barter Exchange Transactions is an Internal Revenue Service (IRS) tax form that is issued by brokers or barter exchanges. The form lists the gains or losses of all broker or barter exchange transactions.

Form 1099-C: According to the IRS, nearly any debt you owe that is canceled, forgiven or discharged becomes taxable income to you. You'll receive a Form 1099-C, "Cancellation of Debt," from the lender that forgave the debt.

Form 1099-DIV : Form 1099-DIV: Dividends and Distributions is an Internal Revenue Service (IRS) form sent to investors who receive distributions from any type of investment during a calendar year. Investors can receive multiple 1099-DIVs. Each Form 1099-DIV should be reported on an investor's tax filing.

Form 1099-INT: Form 1099-INT is the IRS tax form used to report interest income. The form is issued by all payers of interest income to investors at year end and includes a breakdown of all types of interest income and related expenses. Payers must issue Form 1099-INTs for any party to whom they paid at least $10 of interest during the year.

Form 1099-K: A payment settlement entity (PSE) must file Form 1099-K for payments made in settlement of reportable payment transactions for each calendar year. A PSE makes a payment in settlement of a reportable payment transaction, that is, any payment card or third party network transaction, if the PSE submits the instruction to transfer funds to the account of the participating payee to settle the reportable payment transaction.

Form 1099-MISC: The Form 1099-MISC is an Internal Revenue Service (IRS) tax return document used to report miscellaneous payments made to nonemployee individuals, such as independent contractors, during the calendar year. (www.shrm.org)

Form 1099-NEC: In the context of 1099 tax filing, NEC stands for “Nonemployee Compensation” (the first letters of the three words None, Employee and Compensation). Most tax payers recognize NEC as box 7 on Form 1099-MISC. NEC is used to report income paid to independent-contractors / the-self-employed (referred to as 1099 employees for simplification purposes). So, while employers report income that gets paid to employees on Box 1 (Wages, tips, other compensation) of the W2 form, payers report income that gets paid to none-employees on Box 7 (NEC) of the 1099-MISC form. As an individual, if you received form 1099-MISC instead of Form W-2 then the payer did not consider you an employee and did not withhold income tax or social security and Medicare tax.

Form 1099-R: Form 1099-R is a tax form from the Internal Revenue Service (IRS) for reporting distributions from annuities, profit-sharing plans, retirement plans, IRAs, insurance contracts, or pensions.

Form 1099-S: A Form 1099-S is a tax document used to ensure that the full amount received for a real estate sale of some kind is accurately reported. A 1099-S can also be used to report income made on a rental property or investment property. For selling real estate, the buyer must complete and file their own 1099-S.

Form 8952: This form is used to apply for the Voluntary Classification Settlement Program (VCSP) which provides an opportunity for taxpayers to voluntarily reclassify workers as employees for federal employment tax purposes.

Form W-2: Form W-2 is an Internal Revenue Service tax form used in the United States to report wages paid to employees and the taxes withheld from them. Employers must complete a Form W-2 for each employee to whom they pay a salary, wage, or other compensation as part of the employment relationship. - Wikipedia (https://en.wikipedia.org/)

Form W-9: Form W-9 (officially, the "Request for Taxpayer Identification Number and Certification") is used in the United States income tax system by a third party who must file an information return with the Internal Revenue Service (IRS). It requests the name, address, and taxpayer identification information of a taxpayer (in the form of a Social Security Number or Employer Identification Number). - Wikipedia (https://en.m.wikipedia.org/)

Fringe Benefits: An extra benefit supplementing an employee's salary, for example, a company car, subsidized meals, health insurance, etc.

IRC Section 132: Internal Revenue Code Section 132(a) provides eight types of fringe benefits that are excluded from gross income

IRC Section 3406(a): Requires that, under certain circumstances, including the payee's failure to provide a TIN, the payer must perform backup withholding.

IRC Section 409A: Section 409A of the United States Internal Revenue Code regulates nonqualified deferred compensation paid by a "service recipient" to a "service provider" by generally imposing a 20% excise tax when a certain design or operational rules are contained in the section are violated.

IRC Section 6041(a): Provides that persons engaged in trade or business must report certain payments on an information return.

IRC Section 6109(a)(2): Requires that a payee provide a TIN to the payer when the payment will be reportable on an information return.

Independent Contractor: An independent contractor is a person or entity contracted to perform work or provide services to another entity as a non-employee. As a result, independent contractors must pay their own Social Security and Medicare taxes. - Investopedia (https://www.investopedia.com/)

Invoice: An invoice, bill or tab is a commercial document issued by a seller to a buyer, relating to a sale transaction and indicating the products, quantities, and agreed prices for products or services the seller had provided the buyer. Payment terms are usually stated on the invoice.

Limited Liability Company (LLC): An LLC is a corporate structure where members cannot be held accountable for the company’s debts or liabilities. This can shield business owners from losing their entire life savings if, for example, someone were to sue the company. Can be a single member (much like a sole proprietor) or a multi-member. It shares certain traits of both corporations as well as partnerships or sole proprietorships. It is not a corporation.

Minimum Wage: The lowest wage paid or permitted to be paid specifically fixed by a legal authority or by contract as the least that may be paid either to employed persons generally or to a particular category of employed persons.

Nonqualified Deferred Compensation (NQDC): A nonqualified deferred compensation (NQDC) plan is an elective or non-elective plan, agreement, method, or arrangement between an employer and an employee (or service recipient and service provider) to pay the employee or independent contractor compensation in the future. (www.irs.gov)

Overtime: Overtime is time and a half of what an employee earns for every hour worked over 40 in a workweek. The FLSA salary threshold is the minimum salary employers must pay employees for them to be exempt from overtime wages.

Reasonable Cause : Reasonable cause is based on all the facts and circumstances in your situation. The IRS will consider any reason which establishes that you used all ordinary business care and prudence to meet your federal tax obligations but were nevertheless unable to do so.

Safe Harbor: A safe harbor is a provision of a statute or a regulation that specifies that certain conduct will be deemed not to violate a given rule. It is usually found in connection with a vaguer, overall standard. Under the safe harbor, a “rental real estate enterprise” is treated as a trade or business for purposes of Sec. 199A if at least 250 hours of services are performed each tax year with respect to the enterprise. ... The safe harbor requires that separate books and records be maintained for the rental real estate enterprise.

Sole Proprietor: A business that legally has no separate existence from its owner. The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts.

Statutory Employee: A statutory employee is an independent contractor under American common law who is treated as an employee, by statute, for purposes of tax withholdings. For a standard independent contractor, an employer cannot withhold taxes.

Statutory Nonemployee: A statutory nonemployee is a worker classification that aligns with independent contractors. Businesses that employ statutory nonemployees do not need to withhold federal income or FICA (Social Security and Medicare) taxes from their wages.

TIN: A Taxpayer Identification Number is an identifying number used for tax purposes in the United States and in other countries under the Common Reporting Standard. In the United States, it is also known as a Tax Identification Number or Federal Taxpayer Identification Number.

Tariff: Tariffs are taxes imposed by one country on goods imported from another country. Tariffs are trade barriers that raise prices, reduce available quantities of goods and services for US businesses and consumers, and create an economic burden on foreign exporters.

Tax Shelter: A tax shelter is any legal strategy you employ to reduce the amount of income taxes you owe. After receiving much attention in the news in recent years, the term "tax shelter" has a negative connotation relating to deceptive and illegal schemes to evade income tax.

Transaction: In QuickBooks, a transaction type identifies what kind of transaction occurred, such as a customer transaction, bill payment or a bank transfer. When you submit a transaction, you type in a transaction code to represent it.

Vendor: A vendor is a person or business that supplies goods or services to a company. Another term for the vendor is the supplier. In many situations, a company presents the vendor with a purchase order stating the goods or services needed, the price, delivery date, and other terms.