# 1099



## Traditions2 (Jul 3, 2008)

I have a small painting business. I am actually a school teacher full time. Anyhow, I have two or three guys that help me out during the summer and a periodic small job here and there during the school year. Can I just claim them as subcontractors and send them 1099's.? Thanks in advance.


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## 480sparky (Feb 1, 2009)

The IRS has specific guidelines for this.

Generally, if you set the hours, the pay, the work, etc., they're employees.


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## Irishslave (Jun 20, 2010)

480sparky said:


> The IRS has specific guidelines for this.
> 
> Generally, if you set the hours, the pay, the work, etc., they're employees.


 And one of the most widely abused conditions in the Home Improvement, Repair and Installation business


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## Gough (May 1, 2010)

Irishslave said:


> And one of the most widely abused conditions in the Home Improvement, Repair and Installation business


... and one of the nastiest if the IRS gets wind of it. My b-i-l is a contractor in another part of the country and has been in a battle with the IRS for years about this. He used the "subcontractor dodge" and the IRS found out, took exception to his practises, and has been all over him ever since. They're after him for something in the six-figure range and he's been having to operate on a cash basis, keep no tangible assets, etc. for 10+ years.

As much of a pain as it is to follow the rules, I think it's less stressful in the long run. While the chances of the IRS catching you may be small, the price you pay if they do isn't. I told someone that it's a little like getting struck by lightning: the chances aren't great, but you're going to get burned if it happens. There's no point in doing things to increase the risk.


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## Mike Finley (Apr 28, 2004)

Traditions2 said:


> I have a small painting business. I am actually a school teacher full time. Anyhow, I have two or three guys that help me out during the summer and a periodic small job here and there during the school year. Can I just claim them as subcontractors and send them 1099's.? Thanks in advance.


Of course you can. That's what all the part time hacks do so they can work cheaper then the pros.


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## DavidC (Feb 16, 2008)

This is one of the practices that promote artificially low prices for the legitimate above board contractor to compete with. Not clear from your post if they really are employees or subs, although I have my suspicions. If they are truly subs then 1099 is the way to go.

If they are in fact employees and you treat them as subs you are in violation of the tax code, mostly likely operating without required insurance coverage, risking your livelihood and possessions, cheating your employees and making it tougher for your neighboring contractors that are running legit business'.

Good Luck
Dave


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## CookeCarpentry (Feb 26, 2009)

Do they carry their own GL insurance?

Do they set their own hours?

Can they turn down work without consequence?

Do they work for other customers and/or painting contractors?

Do they supply their own equipment or do you?

If you answered "NO" to any or all of these, chances are good that your state will consider them an employee - requiring you to make payroll tax payments, carry Workers' Comp, etc.


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## pera (Mar 29, 2007)

Good answers. I'd like to add, if they are qualified as 1099/independent contractors, you SHOULD NOT/CAN NOT hire them as full time employees. If they have their insurance, set their own hours, work for other people at the same time, so on and so forth, they ARE 1099. Just make sure, you get their EIN # or SSN, so you can hand them the 1099 at the end of the year.
No issues with IRS as long as they are 1099.:thumbsup:


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## tazmanian (Jul 22, 2010)

ACTUALLY - you can still set their hours - and days and times and still have them as independent contractors; and issue them 1099's. Ran business for over 20 years and got into it with the IRS and won. You need to have it in writing for each sub. When in doubt pay a few bux to a cpa.
If not then you will be responsible for their FIC, SSI, UI not to mention all the other goodies of having employees.


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## Tinstaafl (Jan 6, 2008)

tazmanian said:


> ACTUALLY - you can still set their hours - and days and times and still have them as independent contractors; and issue them 1099's.


I'd have to agree with this. It's not at all uncommon, especially in commercial work, to have contractually defined time slots for contractors to come in, do their thing and get out--even with penalties for not adhering to the schedule.

Of course, the whole 1099 thing hinges on many additional criteria as well.


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## CookeCarpentry (Feb 26, 2009)

Tinstaafl said:


> I'd have to agree with this. It's not at all uncommon, especially in commercial work, to have contractually defined time slots for contractors to come in, do their thing and get out--even with penalties for not adhering to the schedule.
> 
> Of course, the whole 1099 thing hinges on many additional criteria as well.


But this is a teacher/painter who has a few guys help him out.

Not like it is a GC hiring a plumbing sub, electric sub, etc.


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## Tinstaafl (Jan 6, 2008)

CookeCarpentry said:


> But this is a teacher/painter who has a few guys help him out.
> 
> Not like it is a GC hiring a plumbing sub, electric sub, etc.


Agreed. Forgot to look up at the OP. :laughing:


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## Tom Struble (Mar 2, 2007)

your so agreeable tonite:whistling


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## tazmanian (Jul 22, 2010)

sorry to say it does not matter if you agree or not. it is the way the system works...whether we like it or not.
i got sued by an employee that signed a contract that she was an independent contractor, and recieved a 1099 for many years......when she left she sued me and tried to collect unemployment benefits which as a 1099 she is not entitled to .......................went through it for three years.........had a 20 million dollar business all legit....................even when you do it by the book you can get ****ed...........just make sure you are doing it to the letter and with an accountant behind you .....i dont care if you are not a gc or just a painter out of a garage....................watch out for people............when the going is good everyone is great but when the going gets tough ..........you dont know what you are in for with anyone!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! TRUST ME


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## Tinstaafl (Jan 6, 2008)

tomstruble said:


> your so agreeable tonite:whistling


Midol. :blush:


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## Paulie (Feb 11, 2009)

Traditions2 said:


> I have a small painting business. I am actually a school teacher full time. Anyhow, I have two or three guys that help me out during the summer and a periodic small job here and there during the school year. Can I just claim them as subcontractors and send them 1099's.? Thanks in advance.


Your join date says 08' and your website says you started in 09' 

So you've been doing business for 3 year's and your not sure about the basic's of running one.


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## Mellison (Aug 3, 2008)

It will work just fine until you get caught.


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## Anti-wingnut (Mar 12, 2009)

tazmanian said:


> sorry to say it does not matter if you agree or not. it is the way the system works...whether we like it or not.
> *i got sued by an employee that signed a contract that she was an independent contractor,* and recieved a 1099 for many years......when she left she sued me and tried to collect unemployment benefits which as a 1099 she is not entitled to .......................went through it for three years.........*had a 20 million dollar business all legit....................even when you do it by the book you can get ****ed...........*just make sure you are doing it to the letter and with an accountant behind you .....i dont care if you are not a gc or just a painter out of a garage....................watch out for people............when the going is good everyone is great but when the going gets tough ..........you dont know what you are in for with anyone!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! TRUST ME


How can you have an independent contractor who is an employee? And you had a $20 million dollar business but no accountant? It doesn't sound like your $20 million dollar business was all that legit, and I think the courts have sided with me.

I'd like to know what the story really was


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## Tom Struble (Mar 2, 2007)

just because you made her sign a contract saying she was doesn't mean the IRS will consider her a legal sub:no:


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## TNTRenovate (Aug 19, 2010)

This is a contractor forum, not an accounting forum. That being said, I owned a company with another fella (mistake #1), and he owned 60% (mistake #2). He hired the subs and treated them like employees. I warned him that we were not doing it right and would get bit. He did not listen to me and we got bit.

Hours are not the biggest issue. You can set the hours.

Pay is a factor. Do you pay them by the hour or by the job? By the hour slides to the side of employee, unless you state in the contract that they agree to invoice for the hours. By the job is best got 1099.

The most important factors are:

1) Do they work for anyone else or are you their only source of income through the season?
2) Do they have proof that they are their own company or self employed and act as such? FEIN# is a good way. Invoices from other customers of there's. Separate contracts and invoices for each job.
3) Do they carry there own liability insurance? This is not just key for 1099, but to protect the HO's that are hiring you. If one of your guys falls and gets hurt, your insurance will not cover them, your HO policy has to.

Again, hire an good accountant and don't take our advice. My feeling is that these guys are really your employees and not subs.


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