On March 5, 2019, the U.S. District Court for the District of Maryland determined that an employee was potentially entitled to relief under section 7434(a) of the Internal Revenue Code when an employer purposefully reports a portion of their wages on Form 1099-MISC as income from self-employment rather than on the Form W-2. In Greenwald v. Regency Mgmt. Svcs., LLC, a memorandum opinion, the court allowed the case to proceed to discovery based on the plaintiffs allegations.
The plaintiffs in the case are former employees who were employed as commissioned sales associates. The plaintiffs did not allege that any hourly wages were reported or withheld upon improperly during the course of their employment, but instead alleged that the defendants failed to withhold on and reported post-termination commission payments on Forms 1099-MISC rather than Forms W-2, forcing the plaintiffs to pay SECA tax. The plaintiffs alleged that willfully reporting the post-termination commission payments on Form 1099-MISC entitled them to damages under section 7434(a), as well as other claims under state law.