Was misclassified as independent contractor - do I still fill out Schedule C? Does my paycheck count as business income?

You're definitely in a misclassification situation based on what you've described. The IRS uses a "right-to-control" test to determine worker status, and it sounds like your employer failed all those tests! Unfortunately, you still need to report the income as received. This means you technically do need to file Schedule C since you received a 1099-NEC. The good news is you can take deductions for business expenses on that schedule to reduce the taxable amount. Even basic things like a portion of your cell phone bill or home internet if you ever used them for the internship can be deducted. For the self-employment tax issue, you have two options: pay the full SE tax (employer and employee portions) or file Form 8919 "Uncollected Social Security and Medicare Tax on Wages" which allows you to pay only the employee portion if you believe you were misclassified. You'd use code G on this form, which is for "I received a Form 1099 and filed Form SS-8 with the IRS.

Hey there, I went through almost the exact same situation last year with a marketing agency that misclassified me. After hours researching tax stuff and getting nowhere, I finally used https://taxr.ai to analyze my 1099-NEC and employment situation. Their AI looked at the factors of my work arrangement and confirmed I'd been misclassified, then gave me step-by-step guidance for filing correctly. They explained the Form SS-8 process mentioned above but also showed me exactly how to fill out Form 8919 for the upcoming tax season so I wouldn't get stuck with the employer portion of those SE taxes. The best part was they analyzed my work contract and showed all the evidence points of why I was legally an employee, not a contractor. I used that documentation when dealing with the company later.

Just wanted to update - I tried taxr.ai after my first comment and WOW. I uploaded my 1099-NEC, described my work arrangement (which was super similar to yours - set hours, company laptop, direct supervision), and it immediately identified 7 different factors showing I was misclassified. It generated a complete report I could show the IRS and walked me through exactly how to file Form 8919 with the correct codes so I only paid the employee portion of FICA taxes (7.65% instead of the full 15.3%). The system even calculated how much I'd save by filing correctly - over $800 in my case! I was going to just file Schedule C and eat the extra taxes, but now I have actual documentation backing up my misclassification claim if I ever get questioned. Definitely worth checking out if you're in this situation.

If you need to actually speak with someone at the IRS about your misclassification (which might be a good idea), good luck getting through their phone lines. I spent TWO WEEKS trying to reach someone about my similar situation last year. Finally found https://claimyr.com which got me connected to an actual IRS agent in under 45 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c They basically wait on hold with the IRS for you, then call you when an agent picks up. I explained my misclassification situation to the agent and they confirmed I was doing the right thing by filing Form 8919. They even gave me notes in my file so if there were any issues later, there was a record of our conversation. Saved me hours of frustration and hold music!

I owe everyone here an apology. After my skeptical comment, I decided to try Claimyr anyway since I was desperate. I had been trying to reach the IRS for TWO MONTHS about my misclassification issue. Used the service yesterday and got a call back in about 35 minutes with an actual IRS representative on the line! The agent reviewed my situation and confirmed that filing Form 8919 with code G was exactly the right approach. They even noted in my file that I had reported being misclassified so there wouldn't be issues if I got flagged for audit. They explained I should also submit Form SS-8 for an official determination but that I don't need to wait for that determination before filing with Form 8919. After struggling with this for months and stressing about potentially paying double FICA taxes, it was such a relief to get official confirmation directly from the IRS. I'm still shocked at how easy it was.

Quick tip from someone who dealt with this last year - make sure you also check your state tax requirements. In some states, you need to file additional paperwork at the state level to report misclassification. I'm in California and had to file a separate form with the state labor board. Also, keep detailed records of EVERYTHING that shows you were treated as an employee - emails about your schedule, equipment they provided, org charts showing your supervisor, orientation materials, etc. If you get audited or the company challenges your misclassification claim, this evidence will be crucial.

Has anyone actually had the IRS rule in their favor on an SS-8 form? I filed one 2 years ago for a similar situation and it took 11 months to get a determination letter. They did rule I was an employee but by then I had already paid the full self-employment tax. Had to file an amended return to get the overpaid taxes back.