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My company went from 1099 to w-2. They then cut my pay from 25% to 23% to cover their half of Medicare and social security taxes. Is this legal?

Forum|Forum|7 years ago
June 5, 2019
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Best answer by Hal_Al

Their half of Medicare and social security taxes is 7.65% of your salary. 23/25 = 92%. So, your net pay is about the same as it was before.

It appears, you are coming out about even. However, if you were deducting any expenses against this income, those deductions will be more limited as a W-2 employee and the net tax effect will be less take home pay.

I suspect the change is a result of a legal challenge. Somebody (possibly the IRS or State labor dept.) was complaining about you being classified as a contractor and not an employee.

fanfare

Employee

Your company put you on a W-2? You had to agree to that. Or go elsewhere.

S

SweetieJean

Employee

Maybe the company got in trouble for misclassifying its workers.

G

garrett-mainAuthor

I think they did get in trouble for having us as 1099

Hal_AlAnswer

Employee

Their half of Medicare and social security taxes is 7.65% of your salary. 23/25 = 92%. So, your net pay is about the same as it was before.

It appears, you are coming out about even. However, if you were deducting any expenses against this income, those deductions will be more limited as a W-2 employee and the net tax effect will be less take home pay.

I suspect the change is a result of a legal challenge. Somebody (possibly the IRS or State labor dept.) was complaining about you being classified as a contractor and not an employee.

S

SweetieJean

Employee

That is a legal question, not an income tax one.

But, unless you are subject to a collective bargaining contract, they they only have to pay you minimum wage for your state.