Can we issue a 1099-MISC for this?
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We had a new out-of-house sales representative begin with our company who lives about an hour away from the corporate office. The CEO of the company wanted me to issue the new sales ...show more
Best AnswerAsker's Choice
If the new rep is an employee, then the bonus must be treated as part of payroll, with taxes taken out, and the amount reported on his W-2 for the year. A check can be written as an "advance" but you still have to go back and deduct the taxes from it, so one (or more) of his future checks will need to have that withheld.
Other Answers (3)Rated Highest
No, it is NOT acceptable to put this on a 1099. You SHOULD have withheld FICA taxes, Federal income taxes at 25%, and any state income taxes from the check. Now you are faced with the tasteless task of recovering the unwithheld tax from the employee OR adding the FICA taxes that you should have withheld to the gross payment and including those on the employee's W-2. You may also be facing penalties from the IRS for not withholding the statutory 25% Federal income tax from the bonus.
Next time, tell the CEO that it MUST go through payroll since that's what the law requires.
If the sales representative is an employee, then you must issue a W-2 and not a 1099-MISC. You may use a 1099-MISC only if the sales representative is an independent contractor.
Ask the CEO if he wants to ask the employee to return part of the check or if he wants to ramp the amount of the signing bonus up by 60% to cover all the taxes.