When you are a recruiter who offers contract staffing services, you are responsible for determining the worker’s status (employee or independent contractor). Sometimes, recruiters misclassify someone working as a contract employee as an independent contractor and do not withhold taxes on their wages. If this happens, the recruiter’s worker must file Form 8919. What is Form 8919?
In contract staffing, you provide workers for your clients. Your clients pay you for your services and the worker’s wages. Then, you pay the contract employees and withhold taxes if they are classified as a W-2 employee.
Employee vs. independent contractor
An employee is included on your payroll. You withhold taxes and send the money to the IRS. One tax you are required to withhold is FICA tax. FICA tax is made up of Social Security and Medicare taxes. You withhold 7.65% of each employee’s wages for FICA, and you also contribute a matching portion.
Each year, you give your employees a copy of Form W-2. Form W-2 lists employee wages and withheld taxes.
An independent contractor is self-employed. They are hired to complete a business-related task, and you do not withhold taxes from their wages. They pay both employer and employee portions of Social Security and Medicare taxes. The independent contractor pays the self-employment tax rate of 15.3%.
An independent contractor receives Form 1099-MISC each year. Form 1099-MISC lists the worker’s wages.
What Is Form 8919?
Workers must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, if they did not have Social Security and Medicare taxes withheld from their wages.
The worker reports the amount of uncollected Social Security and Medicare taxes on Form 8919.
Misclassified workers still owe taxes to the IRS. You also owe money to the IRS for the employer portion of FICA.
You may have questions about worker classification. If you are unsure how to classify a worker, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. Form SS-8 determines whether a worker is an employee or independent worker. Workers who believe they have been misclassified can also file Form SS-8.
The IRS will notify the filer of Form SS-8 of the worker’s correct classification. If the worker is an employee and was misclassified as an independent contractor, your employee must file Form 8919.
IRS Form 8919 and the employee’s responsibilities
Employees will use Form 8919 to determine the amount they owe in Social Security and Medicare taxes. They must report the amount on IRS Form 8919. The amount owed to Social Security is credited to the employee’s record.
IRS Form 8919 instructions
The following instructions apply specifically to the employees who were misclassified as independent contractors. An employee must list the reason for filing Form 8919:
A. The worker filed Form SS-8 and was notified that they are an employee and not an independent contractor.
C. The IRS told the worker (who was classified as an independent contractor) that they are an employee.
G. The worker filed Form SS-8 and did not receive a reply.
H. The worker received both Form W-2 and Form 1099-MISC from the business. The amount included on Form 1099-MISC should have been included on Form W-2.
The employee then lists the name of your firm, provides your Federal Employer Identification Number, the reason they are filing, and their total wages with unreported Social Security and Medicare taxes.
For the remainder of the form, the employee determines their wages subject to Social Security and Medicare taxes and the amount that they owe.
Preventing misclassification in the future
If you don’t want to put yourself at risk for worker misclassification, you might be interested in recruitment back-office solutions.
With FoxHire’s employer of record services, you don’t need to worry about misclassifying workers. FoxHire becomes the legal employer for contract candidates and handles legal, financial, and administrative details of the process. That way, you can focus on recruiting.