Can an individual, not the IRS, sue you for tax fraud because you provided a Form 1099-MISC, instead of a W-2? In other words, can you be sued by someone you misclassified as an independent contractor?
It depends, according to a federal trial court, which concluded that the answer is no, but only if the amount reported on the 1099-MISC was accurate. (Liverett v. Tores Advanced Enterprise Solutions, LLC, No. 1:16-cv-00339, D.C. E.Va., 2016)
That’s what Congress wrote, but what does it mean? The relevant section of the tax code—Section 7434—is entitled: Civil damages for fraudulent filing of information returns. Subsection (a) allows individuals who receive Forms 1099-MISC to sue a payer “with respect to payments purported to be made to any other person.”
An individual sued his government contractor employer after receiving a Form 1099-MISC, instead of a W-2. Crux of his claim: The employer schemed to misclassify its workers a...(register to read more)