The 1099 Employee question...

[Basically]

I have read posts and tried to understand everyone's points.  I thought I read somewhere recently that 1099 employees were going to have to be counted (or was it seasonal employees?).  Anyway, I am working on a potential new client who has a business selling medical devices or pharmaceuticals.  Each employee is paid commissions and bonuses on a 1099 but they  also receive a draw which is paid on a W2.  Add to this that the company is reimbursed the draw reported on the W2 from commissions and bonuses.  

Do these employees count?  Do they count only on their W2 income or ALL of their income?

Thankyou

This is one post I was reading:  Excluding 1099 Employees

 

[david rigby]

2 hours ago, Basically said:

Add to this that the company is reimbursed the draw reported on the W2 from commissions and bonuses.  

What does this mean?

[CuseFan]

Service providers to a company are either employees (W2) or contractors (1099) - how these people can be both is mind boggling to me. Sounds like kind of a shell game to be able count as employees for some reason(s) but not for others (include for H&W benefits but minimize payroll taxes - although not for recipients).

Regardless, it is more the employer/service provider relationship (like who has control) that determines whether someone is considered an employee or independent contractor. You can ask the employer, it's accountant and/or attorney to answer that question for you and then choose to accept and act accordingly, or disagree and walk away.

[Basically]

My understanding is that each employee is given a draw each month.  Then commissions and bonuses are paid to them on a 1099 basis.  

Ok, is that not allowed?

Then (as I think this through) the commission is reduced each month buy the draw which reimburses the company.  

As for a plan design, can it work that the company excludes commissions and bonuses and only count W2 wages?  THEN each employee could open up their own single member 401(k) (if they want) and make contributions based on their 1099 compensation as a sole proprietor?  I guess these guys make real good $$.  

[Dare Johnson]

I am with CuseFan on this - they are either an employee or an independent contractor.

Sometimes there are clients you don't want....

[ESOP Guy]

5 hours ago, Basically said:

My understanding is that each employee is given a draw each month.  Then commissions and bonuses are paid to them on a 1099 basis.  

Ok, is that not allowed?

That is not allowed.  The reason you are confused isn't a matter of pension law but employment law.  You are either an employee (W-2) or an independent contractor (1099).

Also, this isn't something that can be negotiated.   Federal law defines if a person is an employee or not.  The law isn't very clear but that doesn't mean the two parties get to make it up.  

I would start by getting the client to talk to someone who knows employment law and get it cleared up what these people are.  Once it is determined they are an employee or an independent contractor I think you will find your issues pretty much go away. 

The only exception to the above could be if they are a type of insurance agent.  If they are that let us know. 

[Basically]

I have been told it is similar to a car salesmen who is paid on a 1099.  They get a draw and the draw is against commissions.  The draw is I guess giving the salesman money in advance until the end of the month when whatever the salesman is owed is reduced by the draw.  Easy enough to understand.  I will clarify with the advisor his W2 comment.  

Thanks