Taxpayers Misclassify Employees as 1099 Contractors to Avoid Payroll Taxes
10 posts across 5 communities in the last 30 days; 50% from r/tax.
“Are you an employee or a contractor? Not taxing anything out of your taxes and having wildly fluctuating income seems like you might be classified as a 1099 contractor and therefore will not have taxes withheld. [re: 2nd job not taking any federal taxes out. How do I correctly…”
“Everyone in the company is salaried and classified as a 1099 employee You can't be a "1099 employee". You are either a "salaried employee", an "hourly employee" or a "1099 contractor". If you were either type of employee, you would receive a W-2 every January. It doesn't sound…”
“Generally the independent contractor is responsible for FICA/employment taxes, not the person paying them. Based on the fact pattern above, there’s no way the daughter would be classified as an independent contractor. The correct way to put your kids on payroll is to do exactly…”
Several users express concern about being classified as 1099 contractors by a family business despite working full-time hours and lacking benefits. Users believe this is intentional misclassification designed to avoid payroll taxes, which they consider fraud. One user suggests contacting the state labor board.
SOURCES (25)
“Generally the independent contractor is responsible for FICA/employment taxes, not the person paying them. Based on the fact pattern above, there’s no way the daughter would be classified as an independent contractor. The correct way to put your kids on payroll is to do exactly…”
“When we pay someone as a contractor (1099), we pay them 30% more than W2 because we are shifting expense to the contractor. This is assuming they meet the criteria of a contractor. $25/hr as W2 means $33/hr as a 1099 contractor. [re: Boss wants to take taxes out]”
“Are you an employee or a contractor? Not taxing anything out of your taxes and having wildly fluctuating income seems like you might be classified as a 1099 contractor and therefore will not have taxes withheld. [re: 2nd job not taking any federal taxes out. How do I correctly fillout a w-4 for a job that has large swings in pay?]”
“1099 employee is a misnomer. You are not classifying your employees correctly. [re: Night shift job with tons of time and needing ideas]”
“Hi everyone! Earlier this year I worked as a part-time customer service representative for a small local tax business. I just wanted to figure out whether I was misclassified and if I was, what am I supposed to do when I file my taxes? For some context, this job was recommended to me by a friend and she warned me the owner could be pretty hot and cold and generally rude. After the interview, the owner asked for my availability which I didn't find unusual. I was contacted a couple weeks later”
“It's not legal. It's not possible to work full time, direct other people and not be an employee. The owners are playing with fire. If a "contractor" gets hurt at work and the person needs medical care, the state will investigate if told about the situation. The company will lose and have to pay a hefty fine and possibly all medical expenses. Plus, the person can sue for damages including lost pay. Your wife should look for another job and report the employer to the state depart”
“Basically the employer wants to pass the FICA tax responsibility to their employees. It’s illegal. She can file for misclassification but they will probably fire her.”
“Hi all, I am currently working as a 1099 independent contractor in rehab/assisted living facilities. My current employer has not paid me on the correct payroll date, is being extremely effusive with the reason for the delay, despite multiple attempts at reaching out. This has happened a few times in the past, but there seems to be a pattern now. I wanted to know if anyone has also unfortunately gone through this situation, and has any recommendations. I also am feeling a bit stuck on continuing”
“I’ve been offered an interesting position but it is a 1099 role. The company is newer so it could go under as with any company but they have a solid product and small team. I’ve been out of a job for a year and having trouble landing a new role, I was in that middle management and enterprise position prior and have been looking to stay in similar roles but the offers aren’t there. This 1099 job would be their first sales role, so it would be interesting to build out the sales process but it woul”
“Probably no workers comp coverage as 1099, dangerous situation to be in especially in this field.”
Which would be another illegal act on the employer’s part.
“You're misclassified as 1099 if they are providing equipment and dictating schedules... Go the the labor board of the state.”
“Yeah you stand to benefit from understanding what a 1099 is and not normalizing pretending that they are employees.”
“Good morning everyone, I've done research but feel like I could use some additional clarification. I started a side gig recently and was told that I would be a contracted worker and receive a 1099. I have a regular W-2 job already, but I'm not exactly sure how to account for taxes from the side-job. I believe I read somewhere that I could increase my deductions on my W-2 job to account for my 1099 taxes, but would that include federal, state, and city then? I'm not sure why it wouldn”
“A receptionist is not going to qualify to be a 1099. Your employer has misclassified you.”
“How could you be a dental assistant and decide your own work hours? You were intentionally miscategorized.”
“My usual advice is for the misclassified employee to look for another job and as soon as leaving that job, to file the SS-8 to report the crooked employer.”
“Hi all, this happened while I was working 2025 as a dental assistant. I am a dependent and my parent paid a self employment tax because i was given a 1099. The work is do is not self-contract at all. I know my next step could be to file the ss8 and 8919, but I wanted opinions on how seriously I should take this. I have evidence of the hours and work from text communications, and it was ~$700 in taxes paid. I don’t want to sour my relationship with the practice, but at the same time I think the e”
“Classic taking advantage of the poorly educated. Even worse when its family. Ive seen some horrible things with these types of Owners”
“There are using sketchy tax practices to take advantage of people including you. 100% illegal. Now what?”
“If you’re being misclassified as a 1099 contractor, keep in mind that you’re supposed to be paying into Social Security and Medicare through self-employment tax (generally 15.3% total). If those taxes aren’t actually being paid, you’re not building the same Social Security earnings record you should be, and that can affect your future benefits. So it’s not just about the tax treatment now......you could be missing out on credits and benefits down the road.”
“That is a big factor, no doubt, but there is no one determining factor and each situation needs to be individually assessed.”
“they are scamming you and the system by misclassifying you as a 1099 contractor. They are avoiding payroll taxes. This is fraud, pure and simple. I would demand to be classified as an employee or a call to your states labor board”
“Everyone in the company is salaried and classified as a 1099 employee You can't be a "1099 employee". You are either a "salaried employee", an "hourly employee" or a "1099 contractor". If you were either type of employee, you would receive a W-2 every January. It doesn't sound like your working conditions qualify you to be a contractor. You can file Form SS-8 with the IRS to report your employer for misclassifying you, but they will most likely fir”
“Good afternoon yall On mobile so sorry for any formatting weirdness. To try and keep this semi brief I’ve been working remote for my families custom brokerage for about a year and a half as an entry writer. I’m expected to work 8-4 every Monday through Friday with the only true holidays being when both Canada and US share a holiday since we largely work out of the northern border. It’s a salaried position and i’m expecting to make about 38K after taxes this year with no PTO accrual, benefits, si”