• Place misclassified workers on payroll right away!
• All payments since the beginning of the year must be run through payroll –do NOT issue a W-2 and a 1099-MISC.
• Back withholding taxes are calculated at the regular rates. You will then need to seek any reimbursement from the employee for the taxes retroactively withheld.
• The taxes are reported on and remitted with form 941-X (amended quarterly federal payroll tax return).
• State unemployment tax returns will need to be corrected as well.
• Determine if 530 relief applies –this may give federal relief, but not state relief.