Yes, an employee can receive a W2 and a 1099, but it should be avoided whenever possible. That’s because this type of situation is a red flag and frequently results in a response from the IRS seeking further information. It also takes unusual circumstances for this type of dual filing to be legitimate. In many ways, the answer to ‘can an employee receive a w2 and a 1099’ is a simple one.
Different Types of Pay for Different Types of Work
The safest and most common situation in which an employee receive a W2 and a 1099 is when that employee already has an independent business that actively serves other clients on the side. More to this point, it is technically impossible for an “employee” to receive a 1099 because that’s a central function of the forms themselves—to distinguish between employees and independent/self-employed contractors. What you’re really doing is submitting two different forms to a Payee, a W-2 for their work as an employee and a 1099-MISC for their work as an independent contractor.
This blog from Collabrus cites a great example in which a software engineer employee also works as a self-employed painter. The software company could, in theory, hire this employee as an independent contractor to paint their sign marquee.
W2 - 1099 Forms Filer Pricing
|AMS W2 & 1099 Software|
|Price $79 Order Here!|
Worker Classification and the Employee/Employer Relationship
It can be even more problematic, though still technically possible, for an employee to receive a W2 and a 1099 for roughly the same kind of work. That’s because the IRS considers the “nature of the work production” to be one of the defining criteria between an employee and an independent contractor. So, what type of circumstances would justify a change in worker classification?
Here’s another example: Jane works as a content marketing director for a web company in Nashville. As part of the job perks, she was given a company phone and computer. She quits her job in April and moves to Portland for family or other personal reasons. Come August, Jane starts looking online for supplemental income as a self-employed content marketer. In the meantime, the web company in Nashville has filled Jane’s position as Content Marketing Director, but the company still has monthly content goals for which it typically hires contributing writers as independent contractors.
It could, in theory, hire Jane as an independent contractor who works remotely, sets her own schedule, and uses her own telecommunications devices to submit the work.
Use Form SS-8 to Make it Official
Like we said, even if you’re right about an employee receiving a W2 and a 1099, the IRS may question the decision at first. There is, however, a way to know that you’re in the clear: Use Form SS-8. This form will require/enable you to lay out the nature of the work and the business relationship in some detail. You’ll then receive an official determination from the IRS about whether they consider the payee to be an employee or an independent contractor.
Using SS-8 to determine whether your employee requires both a W2 and a 1099 is the best way to navigate through an inevitably murky situation. However, be sure to submit the form as soon as you think you’ll need an official decision. The IRS can take up to 6 months to complete the process. At the end, they will issue a determination letter, which is binding, or issue an informational letter, which is advisory but not binding.
Get W-2 and 1099 Filing Software from AMS
Here’s the good news: No matter whether you classify your workers as employees or contractors, Advanced Micro Solutions (AMS) offers a variety of form filing software capabilities. Our W2/1099 Forms Filer platform provides basic form preparation and essential data management features. It also creates a sophisticated module interaction that allows you to add other products like AMS Payroll and other employer filings. When an employee receive a W2 and a 1099 or your needs are separate from tax and wage reporting, we have the solution. Learn more about our software products and/or download our free demo.