Does anyone have any experience with just paying a person/employee and then giving them a quarterly 10-99 rather than hiring them as an employee? Doing so would allow me to not pay unemployment security on them, in case they suck and I have to terminate them. This would of course be a seasonal as needed person, and not a full-time employee. I am mostly a one-man show. I would also continue to carry worker’s comp on them. My business is in Illinois.
If you are 1099 them then they arent an employee, they are a sub. If they arent a sub then you are required to handle their taxes
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There are rules governing who is a sub and who is an employee. You don’t get to decide based on how you prefer to pay them.
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Yeah I thought I had this all figured out, but I met with my accountant today and he was telling me that if they are part-time/as-needed workers then they can be given a 10-99. It’s the first I’ve heard of this and wanted to see what people thought or if it’s common practice. Thanks
Theres more to it too but I dont remember it all to clearly. I think If theyre a sub theyre not carried by your insurance
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You might want to check with this department:
Another resource might be your local Chamber of Commerce, they usually have linkages to Small Business Administration counselors.
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The IRS has a whole list of guidelines for 1099 sub vs. payroll employee. There are exceptions to some of the rules, but it seems only the big corporations manage to cross enough T’s to avoid repercussions. Comcast/xfinity comes to mind (many of the techs who do install/service calls are actually private contractors).
IMO, you’re 1000x better off hiring an employee, witholding taxes, and doing everything on your terms.
The only exception I think would be if you get some overflow work and you have a friend also in the business who has room in their schedule. That’s what I did with one of my storefront routes for the better part of 2016. They already have their own business setup, can service the customers on their schedule, and pay their own taxes.
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You don’t have to report anything under $600. So don’t know how often your need of an “as needed” helper would be, but something to think about.
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If they get hurt or break something and they do not have Insurance seperate from yours, They might be charged as an employee!
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This link helped a lot. Thank you
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Just be aware the IRS is cracking down on employers who are dodging taxes and insurance by classifying workers as “subcontractors” who fulfill all the functions of a regular employee.
It gets muddled because there is no definitive line in the sand that qualifies a worker as one or the other. Most of the factors have to do with autonomy.
Does he wear your company uniform?
Does he ride with you in a company vehicle?
Is he required to work on a set schedule either with or without your supervision?
Does he receive specific instruction from you on how to conduct normal operations and do his work?
When affirmative answers to those questions start to pile up, you have a much tougher time justifying subcontractor classification for someone under your employ.
If you call your guy a sub, then he should (for the most part) have the freedom to carry out his work at a time and in a manner that is convenient for him. He should also be able to gain profit or suffer loss for the jobs he completes, dependent on how he chooses to fulfill the contract.
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I believe he would also need to have his own GL policy to be considered a sub-contractor.
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That might be dependent on the state. In my state, Alaska, GL is not required to obtain a business license.
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In Florida a worker can obtain 10-99 status without a business license. But the state DOES require a workman’s comp exemption, I believe.
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If they’re sitting in your truck on the way to your jobs and washing windows with your tools at those jobs I believe it’s safe to assume that the IRS will not think they are self employed sub contractors. They’re not stupid.
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Exactly. When in doubt, use the “walks like a duck test”
If it looks like a duck
And it walks like a duck
And it quacks like a duck
Then what is it?
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An employee
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I would also have accepted “a doctor”
Quack
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When I was a lad we had a guinea hen that was raised with ducks. When the ducks would line up and waddle to the creek the guinea hen would get in line and waddle to the creek. When she jumped in the creek she would quickly jump back out (lack of webbed feet was a problem).
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That may be the case here too. I’ll have to check into it. The question is, where does that leave you if your sub-contractor drops a ladder and damages property and has no liability coverage? Are you on the hook personally? I doubt your GL policy would cover it.
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