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Workers Compensation
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I have a dilemma.... we have an employee who is on work restrictions working part time for us. We issued him a check from our Accounts Payable for some side work he did (he claims his son did it due t
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Forums » Topic Forums » Benefits & Compensation » Workers Compensation
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Workers Compensation
posted at 9/1/2011 4:49 AM EDT
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Posts: 17
First: 6/4/2010 Last: 9/14/2011 |
I have a dilemma.... we have an employee who is on work restrictions working part time for us. We issued him a check from our Accounts Payable for some side work he did (he claims his son did it due to his restrictions) however, the check is in his name. Are we required to inform our work comp carrier of the extra money he has received even though it isn't wages? Is he required to report this income? Is there a section in the regulations that talks about this specific information?
Please advise. Thanks so much |
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Workers Compensation
posted at 9/1/2011 5:06 AM EDT
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Posts: 562
First: 11/12/2009 Last: 9/14/2011 |
He did work for you and you paid him for it. Those are wages and yes, it would be considered income. It would also be reportable to your WC Carrier.
As far as WC regs are concerned, those are a matter of state law. |
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Workers Compensation
posted at 9/1/2011 4:15 PM EDT
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
You have a large dilemma here because usually an employee can not also be a 1099 IC except in very limited circumstances. Did the work that was done relate at all to the work he normally does? If so, the IRS might consider it wages that you would owe payroll taxes on. Also does this individual do the same type of work for other clients? It often throws a flag at the IRS is the person has both a W-2 and a 1099 in the same year from the same company.
As for WC, when your WC audit comes around they usually ask for information on ICs and on any 1099s that were paid. They might catch that you paid an employee (Regardless of the reason) and decide that should have been covered under WC wages. I would doubt they would over look it. And then you have the whole issue of paying one person for the work of another. Unless they own a separate company together or some other weird co-mingling of funds/assets or a separate company with an FEIN, I would never have allowed that. You would have been safer by giving the job to the son as an IC and paying him directly. By paying the dad, you put yourself in a very bad position all around...not just with WC. |
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Workers Compensation
posted at 9/2/2011 3:18 AM EDT
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Posts: 17
First: 6/4/2010 Last: 9/14/2011 |
rrupert - thanks so much. I felt the same way, but we operate a little different as you can see.
The serious issue (in my opinion), we pay the father to do work NOT related in any way to his job, so I'm comfortable there, BUT we are not going to issue him a 1099, so how will anyone know? That bothers me also! |
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Workers Compensation
posted at 9/2/2011 5:10 AM EDT
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Posts: 2442
First: 2/12/2000 Last: 9/14/2011 |
Krispy
Company practices and policy do not trump the law. This income must be reported. To knowingly do otherwise puts you personally in a lot of potential jeopardy. In order to protect your self personally I would immediate discuss this with your general counsel. Send him/her the facts in an email and ask for guidance as to how to proceed. Make sure that you cover all the issues. Namely WC income, IRS Income, paying a non employee for work they did not perform, etc. By doing this you accomplish a number of things. 1. The company cannot make you the scapegoat in this matter. The decisions on how to proceed will be decided by others. 2.It provides you with "shelter" if you need it in the future. |
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Workers Compensation
posted at 9/2/2011 5:15 AM EDT
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Posts: 562
First: 11/12/2009 Last: 9/14/2011 |
Your comment "we operate a little differently" bothers me. I worked for a company that "operated a little differently" and left the week before the SEC indicted the Chairman, CEO and CFO (financial shenanigans, not anything HR related).
I hope that nothing like this happens at your organization, but if that's the kind of shortcuts that are tolerated there's a good chance something will bite you in the future. Much better to do things right than ask the question "who's gonna know?" because at some point someone is going to know. |
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