“What I was asking is how should we do our taxes without breaking the law or her getting fired?”----> As said, as long as your spouse is an EE, If that is the case, then she may NOT file a Form 1099. Your spouse, as you can see, must receive a Form W-2 from her ER . If the ER have failed to include your spouse on his payroll tax returns and withhold and pay the taxes then her ER has a significant, costly problem on his hands. Your tax accountant should be explaining this to you. I guess your spouse needs to contact her HR dept. or supervisor to know how the ER classifies her. Your spouse may file IRS form SS-8.If the IRS agrees with your spouse, she can file a 1040 with form 8919 and pays only the EE share of FICA TAxes.If the IRS does not agree with your spouse, then she needs file a 1040 with a schedule C-EZ and SE. A business name, insurance, etc. is not a requirement. The nature of the work determines whether or not your spouse is an employee.However, your spouse needs to contact her ER first.
ALSO, as you said,QUOTE,” my spouse received a 1099, but she meets the classification of a employee in my opinion. She has made the quarterly required tax payments. She doesn't want to lose her job.”---->I am NOT sure what you mean;your spouse loses her job since as an EE, she has made quarterly taxes??? I do not think so.