My boss at my new job has most likely been mischaracterizing his employees as 1099's rather than W-2's. They paid their federal and state income taxes, but never their social security. Now they owe back taxes and penalties. Who's liable?
I've only been at this job for about a month now, so this question doesn't apply to me as much as my coworkers.
There are five employees, including me and another who very recently quit, at this company. Three of them have been there for 3-5 years, and one guy for 8 years. There was another employee who recently quit who'd been there for three years. These people, by any standard, should be reported as W-2's and taxed appropriately. Instead, they were all reported as 1099's. They paid all their state and federal income taxes but not anything else.
To be fair, they really wouldn't be expected to know the difference. The kid who quit and one of the other guys are both 20, and started working here while still in high school. This has been the only job either of them have had. They other two employees are elderly and Asian, with only moderate (at best) mastery of the English language, and have been filing out W-2's most of their life.
The IRS never said anything to any of them, so they all thought they were in the clear. Then one of the 20 year old kids quit, got a new job, and all of a sudden owed tons of back taxes. Now everybody at the company is and nervous. Also, nobody has told my boss anything, and they don't plan on until they figure out what to do.
According to this pamphlet
(PDF), the employer is liable for those taxes. But this has been going on for, at least one of the guys, the last eight consecutive years. Everybody who works there will owe tons of taxes. On top of that, the two elderly Asian employees have not contributed to social security for several years.
I know YANAL (or maybe you are!), but who at this point is liable to pay all those back taxes? What else should we know about this whole mess?