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  • paying cash -- and independent contractors

    Does anyone know if what can be done in this situation: I work for a company (legally) which was issuing me normal paychecks, suddenly they said they would pay me 'cash' (I never asked for this) and they switched me to another kind of paycheck. I asked my original paystubs (with deductions and etc.) to be reinstated, eventually they did this. When I went to pay my taxes, my tax preparer said my stubs didn't add up. The company told me they would fix them. They didn't and my W2s are off. I finally figured out they paid me the 'cash' as an independent contractor (1099) and now I owe taxes--double because I have to pay both sides (employer and employeee, not to mention FICA and a lot of other stuff they left out. This has only reasonably messed up my taxes, but I figure that this company must be telling people who are (or maybe aren't) illegal they will pay 'cash' when in reality, it isn't. What should I do? I called the US Labor Board to see if this practice is illegal (it seems to me that if a company is going to call you an independent contractor, you must have to sign something to that effect). They directed me to another department who never returned my call. Any suggestions, or has anyone heard of this practice?? (I am working on a legal work permit as I've applied for AOS) but I don't know about others at the company.

  • #2
    Does anyone know if what can be done in this situation: I work for a company (legally) which was issuing me normal paychecks, suddenly they said they would pay me 'cash' (I never asked for this) and they switched me to another kind of paycheck. I asked my original paystubs (with deductions and etc.) to be reinstated, eventually they did this. When I went to pay my taxes, my tax preparer said my stubs didn't add up. The company told me they would fix them. They didn't and my W2s are off. I finally figured out they paid me the 'cash' as an independent contractor (1099) and now I owe taxes--double because I have to pay both sides (employer and employeee, not to mention FICA and a lot of other stuff they left out. This has only reasonably messed up my taxes, but I figure that this company must be telling people who are (or maybe aren't) illegal they will pay 'cash' when in reality, it isn't. What should I do? I called the US Labor Board to see if this practice is illegal (it seems to me that if a company is going to call you an independent contractor, you must have to sign something to that effect). They directed me to another department who never returned my call. Any suggestions, or has anyone heard of this practice?? (I am working on a legal work permit as I've applied for AOS) but I don't know about others at the company.

    Comment


    • #3
      It depends on what state you live in as to the rules and who you would contact for help,most states have A TEST that employers have to meet to determine if you are or are not a independent contractor,they can not just make you one.What state do you live in ?


      New Reporting Requirement for Independent Contractors
      Effective January 1, 2001, California has a new law that requires businesses (like yours) and government entities to report on independent contractors to the Employment Development Department (EDD). The reporting requirements are somewhat complex and burdensome, to say the least. However, it is extremely important that you take the time now to understand the impact of this new law to your business, I have summarized the highlights of this new law below for your reference.

      Who must be reported to the EDD?

      The law defines an independent contractor as an individual who is not all employee of the business or government entity for California purposes and who receives compensation or executes a contract for services performed for that business or government either in or out of California. For example, I would be considered an independent contractor to your business and thus you would be subject to the new reporting requirements on payments made to me as defined below. Please note that under this new law a partnership, corporation or other form of legal entity would not fall under the definition of independent contractor and thus would not need to be reported on Form DE 542. Although there does not appear to be a penalty associated with reporting all independent contractors on Form DE 542, you might wish to consult with your legal advisor before electing this approach.



      What information must be reported to the EDD ?

      The Form DE 542 will require the following information on the independent contractor:

      ¨ Name ¨ Address ¨ Social security number


      ¨ Start date of contract or date payments equal $600 or more

      ¨ Amount of contract ¨ Contract expiration date



      When must the information be reported?

      As of January 1, 2001, you must report information to EDD within twenty (20) days of either (1) making payments totaling $600 or more; or (2) entering into a contract for $600 or more with an independent contractor in any calendar year; whichever is earlier.

      What happens if I fail to report the independent contractor as required?

      The EDD may assess a penalty of twenty-four dollars ($24) for each failure to comply with the required timeframes. In addition, if there is conspiracy between the business and the independent contractor not to provide the required reporting, the penalty is $490.

      Where do l go for assistance and additional information?

      At your request, I am available to assist you in complying with this new reporting requirement for independent contracts. Please call me to coordinate this additional service. You can also contact the EDD Hotline at (916) 657-0529 or refer to the EDD Web Site at http://www.edd.ca.gov for the new reporting form, fact sheet, brochure and a list of the frequently asked questions.

      Comment


      • #4
        Hi! I was in a similar situation. My Company decided (after I got the H1 approval) that they were going to have me as an "independent contractor" (which they can't by law) and not take any taxes out of my paychecks. I decided to not complain about that, because I knew that if I will they will fire me and with no other job offer I will become illegal the very next day. So I never complained. Eventually I found another employer to sponsor me and now I'm to move to the new sponsor's Company. I ended up with 1099 - Miscellaneous Income form from my last Company and that for me means that I have to pay extra large taxes now, because they were never withold from my paychecks. That's all I know. My lawyer said that it was all illegal, but not my fault. Good luck to you!

        Comment


        • #5
          To previous postings, I live in CA, so if I never signed anything, how do I find out if the company 'tested'? If what they are doing is illegal? Is there a way to force my company to redo my W2s correctly? I have a hunch that they are abusing this and telling both illegals and legals that they are working for 'cash' but in the end, if they try to pay taxes (or if they are someday audited) they will get screwed.

          Comment


          • #6
            You need to read my post above, copy it and get help if you do not understand it, the law in Calif is clear they must report to this agencies if they MAKE YOU an independent contractor, the phone numbers are there , they can help you .If you need help in Spanish I can refer you to someone who will help.Also let others know this is agasint law and is for there protection.

            Comment


            • #7
              The only way for them to dodge the law is if they paid you less then $600 dollars, but very important to call these people and let them know what this company is doing, they are using loop hole to get out of taxes etc...You can also contact the EDD Hotline at (916) 657-0529 or refer to the EDD Web Site at http://www.edd.ca.gov for the new reporting form, fact sheet, brochure and a list of the frequently asked questions.

              Comment


              • #8
                In the 1990s, I did some work for a major firm in NYC. They decided to call me an independent contractor, and I was in the same situation you are. Turns out, though, that I did not meet the definition of an IC that the IRS was using at the time. If your employer required you to work specific hours at specific locations, you may not be concerned an IC.

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                • #9
                  Thank you for your help all.

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                  • #10
                    No problem, we get paid for this.

                    Comment


                    • #11
                      is this a way for the employer to avoid taxes?

                      Comment


                      • #12
                        Yes, I think that is true, the employer is paying taxes for you, the 'independent contractor' is paying both sides of social security, etc--so if the contractor has to file taxes, they do it with a 1099, which is a lot different.

                        Comment


                        • #13
                          An independent contractor doesn't have to report earnings and pay taxes to the government when individual payments are less than $1,000.

                          Comment


                          • #14
                            I think the limit is $600, not $1,000.

                            Comment


                            • #15
                              Great thread. I've recently gone freelance. Also last year I worked for a company which has now gone under. For the most part, I was a full-time employee, however during the last few months I worked as a contractor, making over the minimum amount of $600 which, I have been told, is required to file a Form 1099 with the IRS (Perhaps a dumb question, but: Is this per job/project or total? E.g., if I have paid a sub only $250 for a job, I do not need to file. However, if over the course of the year the sub has done 3 jobs at $250 each, do I have to file?)
                              On the other hand, if you do multiple projects for one company, and each project is a separate work order and below the taxable limit, do you get taxed on the combined total, or are they considered separate jobs?

                              Although I have received my W-2 form, I have not (and will not) receive an 1099. My employer stated that they "...will not be filing 1099s." I don't have copies of all my invoice(s) and did not keep check stubs ... so how do I file?

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