W-2 pay and independent contractor

UPDATED: Oct 1, 2022

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W-2 pay and independent contractor

I live in california and work for a company that change independent contractor status to hourly W-2. Basically, I use my own car pay my own gas and buy all my own supplies, to do the job, I inspect properties and give notices to debtors, I get paid $10 an hour but I can make 5 inspections in that hour and I’m paid $10 per inspection, so what they do is pay $40 none tax and the $10 taxable. Yet, I received an end of year W-2 only and not also a 1099. Is this legal?

Asked on February 12, 2019 under Employment Labor Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

It is illegal on many levels. If you are an employee (W2) there should be withholding taken out of ALL your pay. They should also have paid into the unemployment and worker's compensation systems for you. If you were an independent contractor, then NONE of your pay should have had tax withholding. It is either/or, not mixed, when working for the same employer. 
As to what to do: consult with a CPA who does taxes--not just a storefront tax preparer, but someone who understands the tax code, speaks to the IRS, and doesn't just operate tax software. Bring him the W2 and proof (e.g. paystubs or bank statements showing direct deposit) of what you were paid and ask him what you need to do, given that they treated you inconsistently for tax purposes and seem to have not provided the correct tax documentation. This is something CPAs do--they straighten out problems involving misreporting of taxes. When a small business I was part owner of had an issue with the IRS, even though I'm a lawyer, I did not try to straighten it myself: I went to a CPA who fixed it for me. Do the same.

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