Recording conversations could be helpful evidence, but be careful about how you approach it. Even in one-party consent states, recording workplace conversations can create trust issues if discovered. Instead, I'd recommend following up important verbal instructions with email confirmations like "Just to confirm our discussion, you'd like me to..." - this creates a paper trail without the potential awkwardness of recordings. The key things to document for worker classification are: specific work schedules you're required to follow, training materials they provide, company policies you must adhere to, performance evaluations, and any integration into company meetings or systems. Screenshots of company org charts showing your position, business cards if they give you any, and company email signatures also help demonstrate you're functioning as an employee rather than an independent contractor.

This is a really common issue, unfortunately. Based on your description - having a supervisor, using their equipment, and them controlling how/when/where you work - you're almost certainly misclassified. The IRS looks at three main categories: behavioral control, financial control, and relationship type. You clearly fail the behavioral control test. A few practical suggestions for your situation: Since you need this for graduation and enjoy the work, I'd focus on minimizing your tax burden for now and potentially address the misclassification after the internship ends. Keep detailed records of everything - your schedule, supervision, equipment used, any training they provide. For taxes, you'll owe both the employee AND employer portions of Social Security/Medicare (15.3% total vs 7.65% as an employee). You can deduct legitimate business expenses, but as others noted, most won't apply since you're working on-site with their equipment. Consider setting aside about 25-30% of each payment for taxes. You may need to make estimated quarterly payments if you'll owe more than $1,000 - the next deadline is June 17th for Q2. After your internship ends, you can file Form SS-8 to get an official IRS determination on your worker status, and Form 8919 to pay only the employee portion of Social Security/Medicare taxes. The employer would then be responsible for their portion plus penalties. Document everything now - it'll make your case much stronger later if needed.

Great suggestion about PEO services! That's actually a really smart approach for short-term situations like this. A PEO can handle all the multi-state payroll complexities, unemployment insurance registration, and tax withholding for a fee that might be worth it compared to the time and hassle of setting everything up yourself for just 3-4 weeks. Some PEOs specialize in temporary or project-based workers and can get you set up quickly. Just make sure they're licensed in the state where your intern will be working. The cost might seem high for such a short engagement, but when you factor in the time you'd spend navigating different state requirements plus the risk of making mistakes, it could actually save money in the long run. Another option to consider is payroll services like Gusto or ADP that handle multi-state compliance - they're often more cost-effective than full PEOs for simple situations like a single intern.

This is such a helpful thread! I'm dealing with a similar situation for our upcoming summer internship program. Based on everything discussed here, it sounds like the consensus is pretty clear that most intern situations require W-2 classification, especially when there's training and direction involved. I'm particularly interested in the multi-state compliance aspect since we're looking at bringing on interns from different states. The Gusto recommendation from @Aisha Rahman sounds really practical - $50-60 total for a short-term engagement seems very reasonable compared to the time and potential mistakes of trying to navigate multiple state tax systems myself. One question I haven't seen addressed: for businesses that regularly hire interns (like every semester), would it make sense to just maintain those multi-state registrations year-round, or is it better to set up and tear down each time? I imagine there might be ongoing filing requirements even during periods when you don't have employees in those states. Also, has anyone dealt with the situation where an intern might work from multiple states during their internship (like if they travel home during the program)? I'm wondering how that affects the tax withholding requirements.

This is such a perfect example of how the tax code can create incredibly unfair situations for ordinary taxpayers. I'm a tax professional, and I see cases like yours more often than you'd think - it's unfortunately become quite common with the suspension of miscellaneous itemized deductions under the TCJA. A few additional points that might help: **Consider filing Form 8275 (Disclosure Statement)** with your tax return to document the unusual circumstances. While this won't change your tax liability, it creates a clear record for the IRS that you're aware of the situation and handling it correctly. This can provide some protection if your return gets flagged for review. **Look into your employee handbook or union contract** (if applicable) to see if there are any provisions about how payroll errors should be handled. Some organizations have policies requiring them to minimize tax impacts on employees when their mistakes create these situations. **Track your effective tax rate impact** - calculate exactly how much extra tax you're paying due to this double taxation. Having that specific dollar amount can be powerful when escalating with your employer or if you decide to pursue any kind of complaint. The reality is that while the law is clear about the $3,000 threshold, the equitable outcome would be for your employer to issue a corrected W-2 or find another way to make you whole. Don't let them dismiss this as "just a tax issue" - it's a financial consequence of their error that disproportionately harms you.

This thread has been incredibly eye-opening! I had no idea that wage repayment situations like this were so common or that the tax code created such unfair outcomes for amounts under $3,000. Reading through everyone's experiences really highlights how employers can essentially pass the financial burden of their mistakes onto employees with no accountability. What really stands out to me is how many people were given the same misleading assurance from their employers - "don't worry, we'll adjust your taxable income as you repay." It seems like HR departments either don't understand the tax implications of cross-year repayments or they're deliberately making promises they can't keep to avoid dealing with the immediate problem. The strategies everyone has shared are fantastic - particularly the Form 8275 disclosure approach that Ingrid mentioned and the emphasis on thorough documentation. I think the key takeaway is that even though the tax law creates an unfair situation, there are still ways to protect yourself and potentially recover some costs through state taxes, escalation with employers, or future changes to the miscellaneous deduction rules. This really should be required reading for anyone dealing with employer payroll errors. The fact that a $3,000 threshold from decades ago is still determining who gets relief while wages and living costs have increased dramatically just shows how out of touch some of these tax provisions have become. Thanks to everyone who shared their experiences - you've created an incredibly valuable resource for people facing this frustrating situation!

Don't forget to check if your vending machine might actually be considered Section 1245 property which could make it subject to different recapture rules. I sold some business equipment last year and had to deal with this.

Can you clarify if you were operating this as a business? Because if you were taking any deductions for the machine operation or claiming depreciation, that changes everything about how you handle the loss.

Don't forget that cryptocurrency transactions can also generate K-1s! I got burned by this last year when I invested in a crypto mining partnership. Had no idea I'd get a K-1 until it showed up in August. If youve done any crypto investing, double check those too.

Great thread everyone! As someone who's dealt with this exact nightmare before, I wanted to add a few more tips that helped me: 1. Check your email! Some partnerships now send K-1 availability notifications via email before mailing hard copies. Search your inbox for "K-1" or the partnership names you know about. 2. If you use a tax preparer, they often maintain client databases of which investments typically generate K-1s. Even if you're doing your own taxes this year, a quick call to your old preparer might jog your memory about partnerships you've forgotten. 3. Don't overlook smaller positions! I once missed a K-1 from a $200 investment that ended up having a $800 loss - those small trades can have big tax implications. 4. For future years, consider keeping a simple spreadsheet throughout the year of any partnership/PTP investments you make. Makes tax season so much less stressful when you have a running list to check against. The taxr.ai and Claimyr suggestions above sound really helpful - wish I'd known about those tools when I was scrambling last year!