unemployment for self-employed part time people (apply, fill, work, money)

[lhf1979]

A friend of mine is in that situation. He has a 1099 job that is seasonal since 2009. In the winters of those years, he had another 1099 job.

This year the winter 1099 job did not call him back and there is a lack of work with the other 1099 job.

The question is he eligible for benefits and if he files, will these places get fined and will he experience backlash from them?

[myrc60]

Usually 1099 is not eligible for unemployment. It is one of the risks we take with the new employment situation in this country.

If your friend has a family to support he should apply for food stamps, welfare, etc. immediately.

[lhf1979]

That's the unfortunate thing because it's like encouraging someone not to work instead of taking a job that gives him money.

[myrc60]

Originally Posted by lhf1979

That's the unfortunate thing because it's like encouraging someone not to work instead of taking a job that gives him money.

Yes, that is true! It saves the companies money which is why it is such a widely used alternative.

Your friend can challenge it with the IRS. There is a form to fill out if he believes he should be classified as a W2 wage earner.

[Skydive Outlaw]

The IRS has made it easier in the past few years for people that earned 1099 income to try to be classified as "employees" when they actually meet certain criteria. However, if prior to starting the work, he signed a form with the company acknowledging that he was in fact a contractor earning 1099 income and he was by definition and practical reality "employed" for less than 40 hours a week for a period under 120 days then that right there excludes him from being considered an employee for unemployment benefit purposes.

The IRS's goal in modifying it's definition of employee vs. 1099 contractor stems from the fact that many 1099 "employees" that are paid in full when they work do not/ have not filed estimated quarterly taxes during the year and the IRS by re-classifying them puts the burden for the taxes to by paid by the company that hires them.

Since unemployment benefits are primarily a state issue, the IRS tends to not classify someone primarily as an employee if they recieve 1099 if it were to only enable them to get state unemployment when they do not have work. Especially since at that point, the state (not the federal government) would have to go back to the very first point in time (which could be a period of a few years) and asses the employer/company for all of the back state unemployment taxes that they did not (and in some cases rightfully so) pay state unemployment tax as well as re-adjusting the rate for that company to reflect the fact they have alot of seasonal employment.

It is important also to note that when a company does pay someone as if they are a contractor recieving 1099 income, they are doing it to save money. In theory, they should be paying the person enough money (above what their work/labor is actually worth) so that although they lack the benefits like unemployment insurance, etc they can put some money away for when they are not working as a contractor or small business person would do. Unfortunately employers that engage in that type of hiring if you even want to call it that, expect to have their cake and eat it too and save money at the same time, while not having to support additional labor as regular employees when their business is slow.

IRS publication 1779 deals with how to define (legally) a contractor versus an employee. Here is a link to that information as well:

Employee vs. Independent Contractor ? Seven Tips for Business Owners (http://www.irs.gov/newsroom/article/0,,id=173423,00.html - broken link)

[lhf1979]

So my question is does the employee risk any ramifications from the "employer" if they are fined for not paying unemployment tax for this worker?