W-2 earnings and 1099 income paid to the same employee
All the sales people at the company that I work for are w-2 employees. The company pays all commissions to their sales people in the form of another check that is not part of the payroll.
The issue is, that even though this is a sales commission, they don't report it but treat it as 1099 earnings. Here is the catch. For 20 years they have paid these commissions and never issued a 1099 to anyone. Also they have never reported this income to the IRS.
So... isn't it illegal to pay commissions to a salaried w-2 sales person and then give them 1099 wages? Especially since they don't issue or report these wages. This appears that it is being done to avoid having to pay the associated fica etc. for the rest of the money which is significantly more, than the base pay. Your thoughts?