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Subject Author Date
independent contractor issue Mary 04-12-2006
Posted by Mary on April 12, 2006, 11:09 pm
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 18-year-old college freshman spent last summer working as a
lab assistant in a state university in his hometown (not the
school he attends as a full time student.)

The university employer did not withhold any taxes.
Apparently they considered him an independent contractor,
despite the fact that he apparently met none of the
criteria. (As a lab assistant, he was clearly not using his
own equipment; he was supervised and trained by the
employer; he did not set his own hours, etc.)

His total earnings from the job were about $5,100. Also had
a small amount of interest income (under $25.) Employer did
not send him a W-2 or a 1099.

>He is a dependent student, so clearly he needs to file a
tax return and he will have some small income tax liability
on his taxable income of approx. $125.

Any opinions about where he should report his wages of $5,100? On line
7 as wages or on a schedule C-EZ with SE?

Is he liable for SE tax? Can he just pay his half of FICA?
If so, what is best way to handle this?

Thanks

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Posted by Missy on April 14, 2006, 3:26 am
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 Mary wrote:

> 18-year-old college freshman spent last summer working as a
> lab assistant in a state university in his hometown (not the
> school he attends as a full time student.)
>
> The university employer did not withhold any taxes.
> Apparently they considered him an independent contractor,
> despite the fact that he apparently met none of the
> criteria. (As a lab assistant, he was clearly not using his
> own equipment; he was supervised and trained by the
> employer; he did not set his own hours, etc.)
>
> His total earnings from the job were about $5,100. Also had
> a small amount of interest income (under $25.) Employer did
> not send him a W-2 or a 1099.

> He is a dependent student, so clearly he needs to file a
> tax return and he will have some small income tax liability
> on his taxable income of approx. $125.
>
> Any opinions about where he should report his wages of $5,100? On line
> 7 as wages or on a schedule C-EZ with SE?
>
> Is he liable for SE tax? Can he just pay his half of FICA?
> If so, what is best way to handle this?


Form 4137 is the form to use when this happens. This way
the s/he will only have to pay their half of the SS &
medicare.

Missy Doyle

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Harlan Lunsford on April 14, 2006, 4:04 am
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Mary wrote:

> 18-year-old college freshman spent last summer working as a
> lab assistant in a state university in his hometown (not the
> school he attends as a full time student.)
>
> The university employer did not withhold any taxes.
> Apparently they considered him an independent contractor,
> despite the fact that he apparently met none of the
> criteria. (As a lab assistant, he was clearly not using his
> own equipment; he was supervised and trained by the
> employer; he did not set his own hours, etc.)
>
> His total earnings from the job were about $5,100. Also had
> a small amount of interest income (under $25.) Employer did
> not send him a W-2 or a 1099.
>

>> He is a dependent student, so clearly he needs to file a

> tax return and he will have some small income tax liability
> on his taxable income of approx. $125.
>
> Any opinions about where he should report his wages of $5,100? On line
> 7 as wages or on a schedule C-EZ with SE?
>
> Is he liable for SE tax? Can he just pay his half of FICA?
> If so, what is best way to handle this?

When he got his first "pay" check, and no taxes were
deducted, he was put on notice as to his status, and since
he continued to work as an independent contractor, then yes,
he does owe the se tax on said renumeration.

ChEAr$,
Harlan Lunsford, EA n LA

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Stuart A. Bronstein on April 15, 2006, 2:28 am
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> When he got his first "pay" check, and no taxes were
> deducted, he was put on notice as to his status, and since
> he continued to work as an independent contractor, then yes,
> he does owe the se tax on said renumeration.

Though from a legal standpoint he was probably an employee.

Stu

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by tobe on April 15, 2006, 2:47 am
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> 18-year-old college freshman spent last summer working as a
> lab assistant in a state university in his hometown
> The university employer did not withhold any taxes.
> Apparently they considered him an independent contractor,
> despite the fact that he apparently met none of the
> criteria.
> His total earnings from the job were about $5,100. Also had
> a small amount of interest income (under $25.) Employer did
> not send him a W-2 or a 1099.

Use Form 4137 to report the income and calculate FICA and
Medicare taxes - and, BTW, cross out everywhere it says
'tips' and write in 'wages'.

The student should also file a Form SS-8 (under separate
cover). That way the IRS will investigate and make a
determination whether the student should have been
classified as an employee or as an independent contractor.
If they determine that he was indeed an employee, the
student will have no more paperwork to file, but the
employer will have to pay their half of the FICA and
Medicare taxes. If the IRS determines that the student was
an independent contractor, the student would then owe the
other half of the FICA and Medicare taxes, and a very small
amount of interest and/or penalty. If you only file the Form
4137, the IRS (or SSA) may eventually come back and say:
"Where is the other half of the taxes due?" (plus penalties
and interest). The time to fix things is now.

Also, on the 'income' line of what ever tax form he uses
(e.g.: line 7 of the 1040), on the dotted line before the
numbers column write in: "SS-8 filed". That way they will
not write back asking about a missing W-2 or 1099.

I encountered a very similar situation with my 19 year old
daughter babysitting last summer at a local couple's home.
I guided her through the process, and she filed an SS-8 and
the Form 4137. She recently received a copy of a 5 page
letter from the IRS confirming her claim as an employee and
guiding the employer through the process to pay the taxes
due.

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

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