Expert: Shirley McAllister, CPP, PHR - 2/14/2008

Question
QUESTION: My boss is now considering giving me and my employees a 1099 for the first time ever!  We have always received a w-2 during this time of the year.  We were also being told that we were going to get a w-2 but at the last minute (and I mean last Friday) we were told that we would get a 1099.  They have destroyed the documents that proved that taxes were taken out of my check and they have never given me a check stub even after I asked them for one millions of times.  I do not have proof that taxes were taken out, but i do have my bosses' word.  What can I do?  They waited until the last minute to tell me this so now I'll have to pay the IRS lots of money that I don't have right now.  Please help me.  Should I get a lawyer or call the IRS to report their wrong doings?

ANSWER: #1 it is illegal to not receive a checkstub for your work listing your wages and deductions. It is also illegal to withhold tax money form your wages and not pay them over to the Governmental departments.

These are violations of regulatory acts.

#2. If they are classifying your job as an independent contractor they must show why it changed from last year's status as an employee and they must have you sign a contract. They then cannot take money from your check for taxes. They cannot classify you as an independent contractor and switch from a W-2 to a 1099 after they have considered you and employee and taken taxes from your wages. There are specific IRS guidelines they must follow before they can change the classification from employer to independent contractor.

Did you punch a timecard when you went to work, did they furnish the materials for you to do your work and the workplace? Did they tell you how to do the job and when to be at work and when you could go home from work? If they did all those things you are an employee.

Check to make sure that they actually withheld funds from you. You do not have a check stub, but you should have a bank statement with the direct deposit information on it. You know how much an hour you make. Figure out what your check should have been according to the hours you worked, than take 7.65% for FICA and Medicare and subtract it from the total. The difference should be your state and federal tax amounts. Make sure funds were withhold first. If Funds for taxes were withheld than I would start with the employer.

First I would talk to the employer and ask why they are changing from a W-2 to a 1099. I would ask them where the money went that they withheld from your wages for taxes. I would also ask what in your job description changed to cause the job to go from Employee status to Independent Contractor status. I would ask for a printout of my hours worked and amounts paid.  Take notes, then date and sign the bottom of your note page. it would be even better if several of you went in at the same time and asked the employer these questions. It might change the employer's mind.

If that does not change their mind than next I would go to the Department of Labor in your state and talk to them. They may be able to talk to the employer and get the Employer to change his mind. The Department of Labor is obligated to investigate complaints which are in violation of the Fair Labor Standards Act.

I would also go to the IRS.

First I would gather up last year's check stubs if you have them to prove that you were an employee last year and if you don't than your W-2 from last year showing that you were an employee. I would talk to your fellow employees and have them also gather up their W-2's from last year. Call the IRS and make an appointment to go in and talk to them or if there is no office close by to have a conference call with an agent. If more than one person goes in and talks to them you will all have more credibility and a better chance of recouping your fund which were withheld. You could ask the agent how they wish you to file your taxes without a W-2. I think you can state that you were not given a W-2 and they will go back on the company to produce one.

The IRS should investigate the case and make the company produce the W-2's and the funds which have been withheld from your wages.

You can file a fraud claim with the IRS on the company by filling out form 3949-A.
Excerpt from IRS instructions:

How Do You Report Suspected Tax Fraud Activity?
 
If you suspect or know of an individual or company that is not complying with the tax laws, you may report this activity by completing Form 3949-A. You may fill out Form 3949-A online, print it and mail it to:

Internal Revenue Service
Fresno, CA 93888

If you do not wish to use Form 3949-A, you may send a letter to the address above. Please include the following information, if available:

Name and address of the person you are reporting
The taxpayer identification number (social security number for an individual or employer identification number for a business)
A brief description of the alleged violation, including how you became aware of or obtained the information
The years involved
The estimated dollar amount of any unreported income
Your name, address and daytime telephone number
Although you are not required to identify yourself, it is helpful to do so. Your identity can be kept confidential.

There is also a Taxpayer Advocate Service that you can contact.
Here is the web link http://www.irs.gov/advocate/content/0,,id=150972,00.html

Then as a last resort you can contact an attorney.

If several of you go together you may find an attorney that will take the case on a commission basis and file a class action against the employer to recoup your funds withheld.



---------- FOLLOW-UP ----------

QUESTION: Thanks for all of the helpful information.  For the majority of last year (until September 20) I was a salaried employee.  On that date I was switched to an hourly employee at the end of the work week.  I was forced to think about the times that I worked during those two weeks and write them down.  Keep in mind that I had been told by my boss to keep a time sheet anyway.  Once I was switched to hourly, they did not take any taxes out, but continued to keep me as an employee based on the guidelines that you listed.  I know that I will owe the IRS for the paychecks I received as an hourly employee, but my boss would owe as well right?  How can I prove that taxes were taken out if I'm was a salaried employee?  Basically all that I have aremy w2's from previous years and my boss' word that things were being handled by a CPA in town.

ANSWER: According to what you are telling me you should have still been classified as an employee and taxes should have been withheld and paid.

You can prove that you received a W-2 last year and was an employee. I assume you can prove that you worked for the company in 2007 and received wages from them. If you job did not change in what you were doing than you are still an employee and taxes should have been withheld.

If your employer will not give you any information, you need to contact the Department of Labor and see if they will help or perhaps seek advice from an attorney. You can also call the IRS and file a report with them.

It is possible that the IRS will make the Company pay all the taxes which should have been withheld.

If I know what state you are in I can send you the information to your state Department of Labor.

Shirley

---------- FOLLOW-UP ----------

QUESTION: Thanks!  I can prove that I have received a w2 last year and the year before.  If the IRS and the Department of Labor would handle this I would be very pleased.  I am in the state of Georgia.  I really hope that the IRS will make the company pay all of the taxes that should have been withheld seeing as though my boss waited until the last minute to tell me anything different.  That would probably be a lot of money that I would owe the IRS that I just don't have.

Answer
Here is the information for the Department of Labor in the state of Georgia.

http://www.dol.state.ga.us/contact_us.htm

You can type in the above link and it will take you to the contact page on the site where you can locate your nearest center, e-mail or phone the DOL.



Here is information to your IRS office's in Georgia.  
Contact My Local Office in Georgia
 
Face-to-face Tax Help

IRS Taxpayer Assistance Centers are your source for personal tax help when you believe your tax issue cannot be handled online or by phone, and you want face-to-face assistance.

If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you're more comfortable talking with someone face-to-face, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative across the counter. No appointment is necessary - just walk in.  If you prefer, you may call a local number (see chart, below) to learn about available and alternate services, and to reschedule appointments with IRS personnel.  If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment may be requested.  All other issues will be handled without an appointment.


Multilingual assistance is available in every office.  Hours of operation are subject to change.

City Street Address Days/Hours of Service Telephone *
Albany 235 Roosevelt Ave. Albany, GA 31701


Monday-Friday - 8:30 a.m.-4:30 p.m

Services Provided
(229) 430-8401
Athens 355 E. Hancock Ave.
Athens, GA 30601 Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

Services Provided
(706) 546-2008



Atlanta (Koger) 2888 Woodcock Blvd.
Atlanta, GA 30341 Monday-Friday - 8:30 a.m.-4:30 p.m.

Services Provided
(404) 338-7962
Atlanta (Summit) 401 W. Peachtree St. NW
Atlanta, GA 30308 Monday-Friday - 8:30 a.m.-4:30 p.m.

**This office will be open for EITC the following Saturdays:
February 2, 9, & 16 from 8:30am - 12:30pm

Services Provided
(404) 338-7962
Augusta 2743 Perimeter Pkwy.
Augusta, GA 30909 Monday-Friday - 8:30 a.m.-4:30 p.m.

Services Provided
(706) 868-1374
Columbus 3604 Macon Rd.
Columbus, GA 31907 Monday-Friday - 8:30 a.m.-4:30 p.m.

**This office will be open for EITC the following Saturdays: February 2, 9, & 16 from 8:30am - 12:30pm

Services Provided
(706) 494-9079
Dalton 1008 Professional Blvd. Dalton, Ga. 30720

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

Services Provided
(404) 338-7962
Gainesville 329 Oak St
Gainesville, GA
30501


Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

Services Provided
(770) 536-2235
Macon 640 North Ave.
Macon, GA 31211 Monday-Friday - 8:30 a.m.-4:30 p.m.

Services Provided
(478) 752-6770
Rome 600 E. First St.
Rome, GA 30161 Monday-Friday
8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

Services Provided
(706) 291-5680
Savannah 120 Barnard St.
Savannah, GA 31401 Monday-Friday - 8:30 a.m.-4:30 p.m.

Services Provided
(912) 651-1430
Smyrna/Marietta 2400 Herodian Way
Smyrna, GA 30080 Monday-Friday - 8:30 a.m.-4:30 p.m.

Services Provided
(404) 338-7962

* Note:  The phone numbers in the chart above are not toll-free for all locations.  When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office.  You may leave a message to request an appointment for help resolving a tax issue or to reschedule an existing appointment.  You will receive a return call within two business days.  If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

Tax Kiosk

Click here to find out more information and the location of a Tax Kiosk in this and other states.

The Taxpayer Advocate Service: Call (404) 338-8099 in Atlanta or 1-877-777-4778 elsewhere, or see  Publication 1546 , The Taxpayer Advocate Service of the IRS.

For further information, see  Tax Topic 104

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
401 W. Peachtree St. NW
Stop 902-D
Atlanta, GA 30308