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Can an employee opt out of W2 status for 1099 status?

An employee would like to opt out of W2 status to become an independent contractor. His job should be classified as a W2 employee according to the standards provided by the IRS. His job also has risks and therefore I feel he needs to be covered under our Worker's Comp policy.

Answers

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

No, do not do it. Regardless of what the employee says they want, don't do it. Your company could be liable to the IRS for penalties and interest and back taxes if the employee doesn't pay their portion of FWT and FICA. If the employee gets mad they could potentially get you for any health insurance and other benefits they missed out on.

Do not chance it.

Here's an article from the IRS:

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee

Gary Honig
Title: President
Company: Creative Capital Associates Factoring Co..
LinkedIn Profile
(President, Creative Capital Associates Factoring Company) |

Chris is absolutely correct. It is not up to the employee, this decision is solely the employers' who bears the potential liability. The IRS instructs the employer what the rules are expects proper classification of workers.

Ross Anderson, CPA, MBA
Title: Controller
Company: TFS Capital
(Controller, TFS Capital) |

His job would have to have significant oversight changes to go to a 1099. It's highly unlikely you could get him to be considered an independent contractor.

Richard Baikie
Title: Director of Finance
Company: Super King Markets
(Director of Finance, Super King Markets) |

If the employee, in your determination, meets the guidelines to be an employee, then keep him as a W-2 employee.
If he disagrees, he can fill out a form SS-8 and see what the IRS determines.

Form SS-8

If, after reviewing the three categories of evidence, it is still unclear whether a worker is an employee or an independent contractor, Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding (PDF) can be filed with the IRS. The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker’s status.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

And probably lead to an audit of all the current 1099 contractors.... which I had to suffer through (they were).

Lyle Newkirk
Title: CFO
Company: Corrigo Incorporated
(CFO, Corrigo Incorporated) |

I agree strongly with all of the above. Don't do it because you are opening your company up for all kinds of liability.

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