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Posted by Tony Cox on April 12, 2006, 7:17 am
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>> I need some help. I am stuck in a unique situation i.e. my
>> earlier company was supposed to give my bonus but it was
>> stuck due to some conflict. After I had left that company
>> they agreed and paid my bonus, but since I had already left
>> the company this amount did not show up in the W-2 form,
>> instead they sent me 1099-Misc. Now, this amount shows up as
>> a non-employee money and since it had no deduction for
>> social or medical taxes, I do not know how to handle it. Can
>> someone give me tips to handle this situation. Please note,
>> I had used TaxAct to fill my tax details, but it does not
>> provide me option to handle this problem. Any help would be
>> appreciated.
> Schedule C or S-EZ. While not 100% correct, will cover it
> on your part. The employer should have included this on your
> W-2 and withheld Social, Medicare and the income taxes,
> matching their half of the Social and Medicare tax.
>
> Your only other option would be to create a Substitute W-2
> and pay your taxes (and your half of Social and Medicare).
What is a substitute W-2 & how does this work?
It seems to me that if the bonus was earned when this
fellow was an employee, it's W-2 income and his
employer ought to be paying the 2nd 1/2 of the SS
and Medicare tax, not him. He may possibly have an
unnecessary estimated tax penalty too. Also, wouldn't
creating a substitute W-2 (however that works)
indicate to the IRS that his old company is misclassifying
workers by paying them as ICs?
Surely the best thing to do here would be to first
contact the company and get them to correct their
mistake? Most of the answers in this thread put the
onus (and the extra tax) on the poor fellow who just
got his bonus!!
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