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Misclassified as 1099 employee California

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  • Misclassified as 1099 employee California

    My 16 yr old daughter was misclassified upon employment as a 'contract' type employee. She worked in a historical house and would greet people at the door and answer questions about the house.
    I noticed when she got her first paycheck that it was a personal type check with no detail, no deductions, no rate of pay etc.
    Being in the payroll business for 25 yrs I told her she needed to ask why she was not getting a normal paycheck. They told her 'oh that's the way we have always done it'. Well that didn't set well with me so I contacted the labor enforcement to check into this company and low and behold towards the end of 2007 she got her first real paycheck. Does she have ANY recourse against her ex-employer for their error on her miss-classification? Now she gets hit with all these back taxes/fica/sdi. Can they be held liable for any of this?

  • #2
    Originally posted by fensh View Post
    Can they be held liable for any of this?
    Yes, they can.

    To my way of thinking, the company owes its share of FICA. I have no idea what SDI is, but if it is employer paid, yes to that, too. Her federal and state tax liabilities remain unchanged. They did not withhold those from her and may have to pay a penalty for that, but I don't see them as being on the hook to pay the income taxes.
    Senior Professional in Human Resources and Certified Staffing Professional with over 30 years experience. Any advice provided is based upon experience and education, but does not constitute legal advice.

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    • #3
      SDI is a CA employee tax called State Disability Insurance. While the employer should have withheld the tax, this particular tax always comes out of the employee's pocket in CA.

      FIT and SIT are both primarily the employee's problem. The government can hit the employer with a stick for failing to withhold these taxes, and maybe the government will, but this in no way helps the employee. The "taxpayer" (aka the employee) is always on the hook for income taxes.

      There legally is no such thing as a "contract employee", and whenever I hear it being used, 99.99999% of the time it is a worker who is legally an employee but whom the employer is trying to avoid their employer obligations on.

      What is missing is UI and FICA. My thinking is that for a 16 year old, FICA is sort of a who-cares. Unless the rules have changed, FICA benefits (assuming FICA is still around when your daughter is eligible) looks at the best 10 year earning period and uses that to base benefits on. The chances that this year will be part of that is pretty unlikely. And half of the FICA comes out of your daughter's pocket. Correcting this will cost both employer and your daughter money now, and that money will probably not help your daughter later.

      UI is also a who-cares, but for a different reason. Worse case is that your daughter files a UI claim, the wages were not declared, she appeals, she wins, the employer gets hammered. Other then a possible delay, there is no real chance of the her being hurt by the employer failing to mention these payments.

      However, she/you have already got in the employer's face on this once already, and they have apparently cleaned up their act on a go forward basis. The big win has already occured. Continuing to rub their noses in this mess might cause blow back for something that is of arguably little positive value.

      Your decision of course. And if the employer is smart (the jury seems to be out on that one), they will fix this retroactively on their own hook, which means retroactively collecting SDI/FICA taxes from your daughter (this would be a legal action on their part).
      "Reality is that which, when you stop believing in it, doesn't go away".
      Philip K. **** (1928-1982)

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      • #4
        I agree with her being on the hook for the Fit & Sit, but her now having to come up with her FICA portion when she no longer works for them (or anybody for that fact) kind of sucks for her. It wasn't her fault and any other 16 year old employee would have never known they were out of compliance either.
        So to file her taxes she will have to file the ss-8 form with the IRS because she got both a W2 and a 1099 from the same employer, plus the new form 8189 (or something like that) to pay FICA?

        Comment

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