1099 contractors or w2

https://www.fmcsa.dot.gov/safety/coercion

 

Most or alot of companies do this to avoid taxes but if you file the form with the IRS they will make them do a reclassification and determine you were indeed an employee and they'll owe all your taxes plus others. Trust me I turned one guy in and they actually went back several years and he had to pay alot in fact I think it put him outta business.

 

Nobody is going to pin you as long as you pay the taxes. You may be misclassified as 1099, BUT until that determination is officially reached YOU are responsible for paying ALL taxes (his and yours) in the exact same way a business owner would. That means filing quarterly estimated taxes OR not do so and pay an added small penalty in the end. It's only one month, so the damage won't be bad at all after you are properly employed elsewhere. You just claim the income just like a cash windfall in this case.

The issues with 1099 misclassification are myriad. Unless YOU pay quarterlies: you aren't covered by unemployment, you don't have workman's comp, no social security payments on your behalf, no medicare, no medicaid, no insurance offerings, NO BUSINESS TAX DEDUCTIONS, nothing ELSE that is covered by that payroll tax. You are also raped on your compensation (true contractors negotiate their rates and are usually a lot higher). True contractors also bring their own equipment (tax deduction), have a declared business (tax deduction), and handle any and all issues with said equipment (tax deductions), handle their own insurance needs (partial tax deductions), and can hire anyone qualified to do that job for you. it places you in a higher tax bracket since no taxes are being paid by what should be a W2 employer. In the end, without all those deductions you lose more and make less (or roughly the same) as a W2. Plus, you'd have to file as a business to make all that legal. If you do not have a registered EIN, you cannot. Thus, you pay an even higher rate due to your taxable income now taxed at 100% of that income (instead of the part left after a certain point). Never do 1099 UNLESS you have a true contract stating such and actually meet the very easy to understand criteria OR you get paid cash and can just "forget" to report it. That last part is highly inadvisable sine the paperwork will not match your living standard.

You would be in the right to report the guy. There really needs to be a crackdown on this misclassification crap. I can buy a misunderstanding of the rules IF this hasn't been the case for a decade. He knows what he's doing and likely thinks it's a victimless crime. Don't just report to IRS, report to your state's Labor board. Unless you have a close friend or relative who works for the IRS, they aren't likely to do a dang thing until their boss (the President) orders it done. The state labor board is far more likely to investigate and THAT will get TWO agencies involved - state and through them federal. Unless you and/or he are in a state without an income tax. It's a tax dodge, but you only doing that for one month is understandable and will not get you into trouble. If anyone asks, just tell the truth: once you found out, you left ASAP.

Other than that, never do 1099 unless you bring your own rig and equipment after registering your own business.