Tax Law (Questions About Taxes)/1099 v. W2


My 17-year-old daughter has worked for a small, locally owned retail clothing store for more than 2 years. The first year she worked there, she received a W2. She did not file an income tax return because she claimed exempt and her earnings weren't high enough to file/owe taxes. This year, the store owner issued her a 1099-MISC with the $2,000 she earned listed as non-employee compensation. Now my daughter must file a return and pay a lot in income taxes to boot when if she had been W2'd, she'd have no income tax liability. I don't know what to do. I don't believe my daughter should have been issued a 1099. I have emailed her employer and received no response. The store is now out of business. We are also under a time crunch due to needed to file a FAFSA this year.

It sounds like the store wanted to avoid paying taxes on her income. The store also avoided paying unemployment insurance.

If you file the return, you will need Schedule C and SE and pay the Social Security and Medicare taxes, which will amount to about 12% of the amount earned.

If you feel she was a misclassified employee, you can file IRS Form SS-8 for the IRS to determine the proper classification. If the IRS agrees with you, you will not be responsible for half of the SE tax and the company will be asked to fork it over to the IRS and stop doing the misclassification of workers.

In the meanwhile, you will need to file and pay the tax shown on the return. If the IRS takes your side, you may get a refund later.

Tax Law (Questions About Taxes)

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Randall Klein, MBA, EA


I am an expert in personal and small business taxation, including Forms 1040, 1120, 1120S, 1065. I can answer any type of tax question except those that are requesting help in illegal tax evasion. Tax avoidance is legal, however. I do not do offshore trusts, or opt-out of the tax system type of queries.


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