Nonprofit Law/W-2 & 1099


Can an employee also do contract labor for the same corporation? We have water operators who also set meters (which is in their job description).  They claim meter sets as contract labor so therefore they receive a W-2 and a 1099.  Is this legal?

The same person may receive both a W-2 and a 1099-Misc from the
same employer.  See pdf page 76 of that IRS Training Manual
---Start of Excerpt--
A worker may perform services for a single business in two or
more separate capacities. A dual status worker performs one  type
of service for a business as an independent contractor, but
performs a different type of service for the business as an
---End of Excerpt--
"IRS Internal Training: Employee/Independent Contractor"at

There are many factors that the IRS uses to conclude whether
someone is an employee or an independent contractor and the
nonprofit corporation's treatment of someone as an independent
contractor instead as an employee for tax purposes may be
incorrect and subject the nonprofit organization to taxes and
penalties. For the factors the IRS considers, see

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic


I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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