Can he really do it?======>> I guess it depends; your wife is his employee if he can control not only what work is done, but how it is done. If your wife is his employee, it does not matter whether the work is full time or part time or that he hired your wife through an agency or from a list provided by an agency or association. It also does not matter whether he pays your wife on an hourly, daily, or weekly basis, or by the job. Then, he must issue your wife a W2; if he Pays cash wages of $1,900 or more in 2014 to your wife who is a household employee, then he withholds and pays social security and Medicare taxes of 7.65%.Also if he Pays total cash wages of $1K or more in any calendar quarter of 2013 or 2014 to your wife that is a household employee, then,he must pay federal unemployment tax, 6% of cash wages up to $7K a year.I mean if he has a household employee, he may need to withhold and pay social security and Medicare taxes, pay federal unemployment tax, or both.
If only your wife can control how the work is done, she is not his employee but is self-employed. A self-employed worker usually provides her own tools and offers services to the general public in an independent business.
If an agency provides the worker and controls what work is done and how it is done, the worker is not his employee. In this case, your wife as a contractor, needs to file her Sch C/SE since her employer does not withhold any tax from her 1099.
If so, how does that work? Does she have to pay taxes for the past 5 years? ======>>it depends; aslongas she was an employee, then yes both your wife and he MUST pay all social taxes, penalties , and even interest to IRS . It is critical that he correctly determines whether your wife providing services is a W2 employee or independent contractor.As said, he is a business owner hiring or contracting with your wife to provide services, he must determine whether your wife providing services is an employee or independent contractor; IRS can not determine if she is a W2 employee or a 1099 contractor until they receive a form SS-8. If it is still unclear whether your wife is an employee or an independent contractor, Form SS-8 can be filed with the IRS. The form may be filed by either the business or your wife. The IRS will review the facts and circumstances and officially determine her status.Generally, he must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee aslongas your wife is his W2 employee. But He does not generally have to withhold or pay any taxes on payments to independent contractor if she is a contactor.
Does she only getting her social security 2 years ago, makes her only pay for the 2 years that she have it? =====>>>>>>>It does not matter when she receives her SSN from INS. She needs to know if she a W2 employee or an independent contractor.