Ask the taxgirl: Independent Contractor and Employee in the Same Tax Year

Taxpayer asks:

Hello Taxgirl,
I have a simple, yet complicated tax question. I worked for a company last year for the first 5 months, then for the last 7 months I was self- employed. Do I file two separate forms? Anything you can tell me I will greatly appreciate.
Thank you,

Taxgirl says:

Here’s a lawyerly answer for you: yes and no.

You’ll only need to file one tax return. In your case, you’ll likely need the long form, a plain vanilla 1040.

Report your wages paid by the employer just like normal, using your form W-2, on line 7 of your 1040.

When it comes to your self-employment wages, you’re likely going to want to file a Schedule C so that you can include your self-employment income and deduct the expenses associated with running your business. The Schedule C is basically just an addendum to your 1040 – not really a separate form in the pure sense, but an additional page (check it out here as a pdf).

Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.

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11 thoughts on “Ask the taxgirl: Independent Contractor and Employee in the Same Tax Year

  1. I’ve got an interesting situation, can someone receive a 1099 and W-2 from the same company if they have two distinctly different positions within the company? One where they are required to clock hours and report to the owner (front desk duties), and the other where they have the freedom to schedule appointments with clients and provide services (personal training in this case) directly to the clients without direction from management or an owner. All the client fees are collected by the gym, and are then paid to the trainer net of thier rent expense. Those payments are recorded as 1099 income and the front desk hours are reported as W-2 income. What do you think?

  2. In 2008, I was consulting for a company for the first 4 months and employeed by the same company for the last 8. The company gave me two forms (W-2 and 1099) but I only have to file one (1040).

  3. Yes, you can be classified as an independent contractor and as an employee by the same company in the same tax year. It is unusual but not impossible – as a result, it can be tricky to report.

    The key is to make sure that the independent contractor duties are both clearly separate from the requirements of the salaried employee position AND still meet the regular criteria for being an independent contractor. The last part is very important: even if the job descriptions are different enough to justify another pay rate or job title, that doesn’t translate into independent contractor status.

  4. Just out of curiosity, here would I find the information to support your findings that you can be both an independent contractor and an employee for the same company? Is there a specific code section? Or publication?

  5. Pub 15 is a good start: You can also seeRev. Rule 87-41, 1987.

    My info is based on the definitions of both according to the Tax Code and case law (as well as experience). If you’re interested in case law about the differences bt the two, read the Microsoft cases on this subject, esp Microsoft III.

  6. Hi, as an independent contractor/facilitator for loan processing ,when receivng my finder fee for a contract or assignment deal, when the payer begin to have the funds wired into the payee bank account, the payee bank information such as, aba routing number,, account number, tax id #, etc, is the tax id #, required at the time of the wired funding to the payee bank account to received the funds, or can it be left blank?

  7. My lil brother is new to being an indepedent contractor (roof inspector) and hasn’t filed anything for 2009. He has been both a W2 and 1099 for 2009. Is he required to file by the annual tax deadline of Apr 15 or should he have made quarterly estimated tax payments and is now due Jan 15?
    Also, which forms are required? I know the 1040 is, but not sure what else he is to use. Sched C, ES, SE? Thanks for any info you can provide!

  8. My husband had 3 shares in a company that he worked for. He received a K-1 also for the company. He has a note signed by an officer in the company that states that he was an employee. He was given medical insurance and the also reimbursed him for exprenses. They did not give him a w-2 but gave him a 1099, Who is responsible for the taxes?

  9. I filed as an independent contractor for the tax year 2011, and paid quarterly estimated payments. For 2012, I continued to be under independent contractor status and pay quarterly estimated payments. But mid-way through the year, I became salaried and now my paychecks are withholding taxes. So here is my question: Should I continue to pay quarterly estimated payments for 2012, even though my paychecks are now withholding taxes? I do think I can ask payroll to adjust the amount of withholding. Thanks!

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