Can a Waitress Be Paid With a 1099?
Learn how the IRS defines a waitress's worker status. This classification impacts your tax obligations, eligibility for benefits, and employment protections.
The distinction between an employee and an independent contractor is important in U.S. tax and labor law. An employee receives a Form W-2, with their employer withholding income taxes and their share of Social Security and Medicare taxes. An independent contractor receives a Form 1099-NEC for their services and is responsible for paying their own self-employment taxes. This classification determines tax responsibilities, eligibility for benefits, and legal protections for workers and businesses.
Determining Worker Status for a Waitress
The Internal Revenue Service (IRS) provides guidelines to determine if a worker is an employee or an independent contractor. These guidelines fall into three categories: Behavioral Control, Financial Control, and the Relationship of the Parties. The entire relationship is examined to determine the degree of control or independence, and for a waitress, this review almost invariably leads to the conclusion that they are an employee.
Behavioral control addresses the business’s right to direct and control how the worker performs their job. This includes instructions about when and where to work, what tools to use, and how to perform specific tasks. A restaurant dictates a waitress’s schedule, requires a uniform, and enforces procedures for taking orders and serving food. The waitress does not have the freedom to decide how to accomplish their work, which indicates an employee relationship.
Financial control considers the business’s right to direct the financial aspects of the worker’s job. This involves whether the worker has a significant investment in equipment, can realize a profit or loss, and how they are paid. A waitress does not invest in the restaurant’s equipment, and their earnings consist of an hourly wage and tips. They do not have the ability to generate a business profit or loss in the way a separate enterprise would.
The relationship of the parties examines how the worker and business perceive their arrangement. This includes written contracts describing the relationship and whether the business provides employee-type benefits, such as insurance or paid leave. The relationship between a waitress and a restaurant is ongoing and continuous, rather than for a single project. This permanence suggests an employer-employee relationship where the work is a core part of the restaurant’s business.
Tax and Employment Law Implications
Misclassifying a waitress as a 1099 independent contractor has serious consequences, shifting tax burdens and removing legal protections. An employee has 7.65% of their gross wages withheld for Social Security and Medicare (FICA) taxes, and the employer pays a matching 7.65%. A worker paid on a 1099 is considered self-employed and must pay the entire 15.3% self-employment tax, doubling their payroll tax liability.
Beyond the tax cost, misclassification strips a worker of protections guaranteed to employees. Workers classified as independent contractors are not eligible for unemployment insurance if they lose their job. They are also excluded from workers’ compensation coverage, which provides medical and wage benefits to employees injured on the job.
Misclassified waitresses also lose the protections of the Fair Labor Standards Act (FLSA). The FLSA establishes the federal minimum wage, overtime pay for hours worked over 40 in a week, and rules regarding tip credits. An independent contractor is not covered by these provisions, leaving them without legal recourse for wage violations.
How to Report Misclassification to the IRS
A worker who believes they have been misclassified can ask the IRS to make an official determination of their status. This requires submitting specific forms and information about the working relationship. The primary form for this process is IRS Form SS-8, “Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.”
To complete Form SS-8, a waitress will need to provide a comprehensive description of the working relationship. Necessary information includes:
- The restaurant’s full name, address, and Employer Identification Number (EIN).
- A detailed description of job duties, including training and supervision.
- Information about scheduling and how payment was received.
- Copies of any contracts, payment records like 1099s, and other documents that show the employer’s control.
The completed Form SS-8 should be mailed to the IRS service center listed in the form’s instructions. The determination process can take six months or more, during which the IRS will also contact the employer for their side of the story. The agency will then issue a formal determination letter to both parties.
While waiting for the SS-8 determination, the worker should file their annual income tax return (Form 1040) with Form 8919, “Uncollected Social Security and Medicare Tax on Wages,” attached. This form allows the worker to calculate and pay only their employee share of FICA taxes (7.65%) instead of the full self-employment rate. This ensures their earnings are properly credited for future Social Security benefits without shouldering the employer’s tax burden.