<prompt> Human: I began working in Novemeber of 2014 as an independent contractor. I was paid as a contractor up until a week ago when our payroll system was established. I filed a W4 and an I-9 and recieved a taxed check, along with all of the other staff, the following pay period. I am now in charge of payroll and my boss sent me this:In order to avoid an audit by NYS and IRS, we will need to issue everyone W-2s, no one will receive 1099s for past or present. Taxes not paid by yourselves and employees for previous checks will need to be deducted from the next check. In the meantime, our bookkeeper has totaled all checks previously paid that will need to be addressed and have highlighted in red what needs to for certain employees belowIt goes on to list all employee and contractor names and what I assume is the amount of tax calculated from previous checks. There are also contractors who no longer work for us and a statement next to their names requesting I fill out W2s for them. Needless to say I am uncomfortable doing this. I know I owe money to the government but my employer says he will not be providing 1099s. I dont want my employers book keeper to calculate that tax and deduct for me from future checks as I dont think its their place. Id rather pay that to the government myself. Besides, to back track and file W2s for people who no longer work for us and worked under the assumption they were independent contractors, sounds fraudulent. What should I do?Edit: I have one other person above me besides my boss the owner. I requested a meeting with them tomorrow to go over some things which concern me: For the employees who were let go, Filing form W-2 without their permission Deducting money for taxes on previous written checks to make up for untaxed earnings. Employees under the assumption that they were 1099 throughout employment, informing them of the change and legality of that change. If employees already paid taxes on earnings, how to proceed with informing staff that they will have future deductions from their checks. All of these points are obviously hinting that I know whats going on may not be legal. Perhaps Im wrong and misinterpreted the e-mail but it doesnt look that way. I know my boss will not have the answers to my questions and may ask me or my co-worker to proceed. I am prepared to quit, unfortunately I just moved into a new apartment and have to prepare for a lengthy unemployment period.Assistant: I was paid as a contractor up until a week ago when our payroll system was established.At first this lit off all my scam alert sensors like it did for everyone else here. However, rereading it it sounds like it could be a small or startup company that was basically doing things wrong, and just established a real payroll system and got an accountant, now realize what they were doing was wrong and are trying to fix it. They were initially treating everyone as 1099 employees. But there are strict IRS rules about who can be a 1099 employee you have to control your own hours, supply your own tools, etc., and perhaps most folks at the company dont fit that description and really should have been W2 employees all along.Its good that theyre fixing it, but they need to think about how this will affect their staff: For income tax, it only changes who deducts and pays it employer versus you - and not the total amount deducted and paid. For social security and medicare FICA, this will be about 7.65 benefit to employees, because as W2 employees the employer is responsible to pay half, whereas 1099 contractors have to pay all 15.3 themselves. Cash flow is a big gotcha - before suddenly switching statuses and retroactively deducting taxes, the employer needs to work with the staff to see how this will affect them. Some will have already paid taxes themselves and need to figure out how to get it back.To me the bottom line is that as long as the employer will now start paying their half of FICA without changing anyones salaries, employees stand to benefit 7.65 from this change, and therefore you might want to work with your employer to figure out a smooth and legal way to fix everything.Human: Thank you for your advice. Im more worried about creating W-2s in payroll for employees that arent with the company anymore. People who came and went assuming they were 1099.  <response>: If they try to retroactively change previous employees reported status, they wont have to worry about whistleblowers... they will have invited it by filing ammended tax returns for previous years with that rewrite.Dust off your resume. 