I agree that is what it is set up for.  But isn't compensating a worker outside of payroll (like this the OPs situation) basically the same thing?  Code "H" is if the employee receives both a W-2 and a 1099, and I view this as pretty much the same (but the employer forgot to file the 1099).  But maybe I'm wrong.

Doesn't the taxpayer need to pay their share of FICA?  If so, how is that done?  Do they just wait until the IRS follows up on the 4852?