When Does Form 8919 Line 6 Apply and What to Include?

Form 8919 is used by workers who believe they were misclassified as independent contractors rather than employees. This form ensures that Social Security and Medicare taxes are properly credited to the worker’s record, preventing gaps in benefits due to incorrect classification.

When Line 6 Applies

Line 6 of Form 8919 is used when a worker has not received a Form 1099-NEC or Form W-2 from the entity that paid them but believes they should have been classified as an employee. This often happens when an employer fails to report payments to the IRS, either by mistake or to avoid payroll tax obligations. Workers must provide a valid reason for their classification claim, selecting the appropriate code that corresponds to their case.

One common scenario is when a worker has contacted the IRS about their classification, but the agency has not yet made a determination. In such cases, the worker must still report their earnings and pay the correct Social Security and Medicare taxes. Another instance is when an employer refuses to issue a W-2 despite the worker meeting the IRS criteria for employee status, such as being subject to control over work hours, location, and methods.

Types of Compensation to Include

Workers completing Form 8919 must report all compensation subject to Social Security and Medicare taxes, including base wages, bonuses, commissions, and overtime pay. If a worker received per diem payments or stipends, they should determine whether these were properly classified as taxable income or legitimate reimbursements for business expenses.

Non-cash compensation, such as stock options or equity grants, may also need to be reported if provided in exchange for services. The fair market value of such benefits at the time of receipt should be included in total compensation. Similarly, taxable fringe benefits like housing or transportation allowances should be factored in when calculating the amount subject to Social Security and Medicare taxes.

Employer Classification Conflicts

Disputes over classification often stem from differing interpretations of IRS guidelines, particularly the three-factor test that examines behavioral control, financial control, and the nature of the relationship. Employers who classify workers as independent contractors may argue that the worker has flexibility in scheduling, lacks direct supervision, or is engaged in project-based work. However, the IRS scrutinizes these claims, especially when workers perform core business functions or rely on a single payer for their income.

State labor laws can complicate classification disputes. Some states, such as California under Assembly Bill 5 (AB5), use stricter tests like the ABC test, which presumes workers are employees unless all three conditions are met: (A) the worker is free from company control, (B) the work performed is outside the usual course of business, and (C) the worker operates an independent business. A worker may be classified as an independent contractor for federal tax purposes but considered an employee under state law, leading to conflicting payroll tax and benefit obligations.

Legal precedent also plays a role in classification conflicts. Court rulings have established that long-term, exclusive work relationships and employer-provided training are strong indicators of employee status. Cases such as Dynamex Operations West, Inc. v. Superior Court have reinforced stricter classification standards, making it harder for businesses to justify contractor status when workers perform integral business functions under company direction.

Correcting Social Security Tax Issues

Workers who have been misclassified may face long-term consequences if their earnings are not properly credited to Social Security. Since retirement, disability, and survivor benefits are based on taxable earnings, any shortfall can reduce future payouts. Filing Form 8919 ensures that the worker’s share of Social Security and Medicare taxes is reported, but it does not correct the employer’s failure to pay the matching portion. The IRS may pursue the employer for their share through payroll tax audits, but workers should monitor their Social Security earnings record via the Social Security Administration (SSA) website to confirm that reported wages align with actual income.

If discrepancies arise, workers can submit a Request for Correction of Earnings Record (Form SSA-7008) to the SSA with supporting documentation, such as pay stubs, contracts, or bank statements reflecting payments. This is especially important for those nearing retirement age, as benefit calculations are based on the 35 highest-earning years. Errors left uncorrected could result in permanently lower monthly benefits. Additionally, workers who suspect their employer has failed to remit withheld taxes to the IRS should consider filing Form 3949-A to report suspected tax fraud.

Documentation to Substantiate Entries

Accurately completing Form 8919 requires maintaining thorough records to support the claim of misclassification. The IRS may request evidence demonstrating that the worker functioned as an employee rather than an independent contractor. Pay stubs, bank statements, or invoices showing consistent payments from the employer can help establish the nature of the working relationship. Employment agreements, offer letters, or email correspondence outlining job expectations, supervision, or company-provided resources further strengthen the case.

Workers should also retain copies of any communications with the employer regarding classification disputes. If the employer issued a Form 1099-NEC instead of a W-2, this document should be included to show how the income was reported. Additionally, if the worker filed Form SS-8 (Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding) with the IRS, keeping a copy of the submission and any IRS responses can provide further support. These records substantiate entries on Form 8919 and serve as protection in case of an audit.

Potential IRS Follow-Up Procedures

Once Form 8919 is filed, the IRS may review the case to determine whether the employer improperly classified the worker. If misclassification is found, the agency may conduct a payroll tax audit, which can result in back taxes, penalties, and interest being assessed against the employer. The IRS may also contact the worker for additional documentation or clarification regarding their employment status.

In some cases, the IRS may reclassify multiple workers within the same company if a pattern of misclassification is identified. Employers found to have willfully misclassified employees to avoid payroll taxes can face significant financial consequences, including liability for both the employer and employee portions of Social Security and Medicare taxes. Workers should be prepared for potential delays in resolving their case, as IRS investigations can take months or even years. Checking Social Security earnings records periodically ensures that reported wages are updated accordingly.