# giving employees a 1099



## drich (Apr 18, 2014)

Hello.

My CPA tells me, as an electrical contractor, it is ok to give 1099 to my employees if they are not going to work for a long period of time. Is this true?


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## Pearce Services (Nov 21, 2005)

It's time for a new CPA


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## CENTERLINE MV (Jan 9, 2011)

If they are working consistent full work weeks (40 hrs) they are w-2 employees regardless how long they work for you.


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## twill59 (Aug 14, 2009)

Are they employees, or are they subs? 
Subs get a 1099, employees a w-2.


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## Randy Bush (Mar 7, 2011)

Time to find new CPA , Far as I know you can't legally 1099 a EMPLOYEE. Which is what you are calling them.


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## Driftweed (Nov 7, 2012)

He may just be using "employees" s a blanket term for people working for him.


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## ExtremePride (Oct 27, 2010)

I went through this a year ago, I was always given a 1099 so I kept that when I went out on my own 8 years ago, last year I found out by the irs that it is not legal, if you supply tools, tell then what to do and when to be to work and they do not have their own business then they are employees, get yourself setup with the state and federal. All it takes is someone to file for unemployment and they got you


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## Randy Bush (Mar 7, 2011)

Driftweed said:


> He may just be using "employees" s a blanket term for people working for him.


If so then he needs to stop calling subs employees if that is what they are. 

To me there is a big difference in doing work as a sub for some one and working for some one.


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## DaVinciRemodel (Oct 7, 2009)

How long is “a long period of time”? If the total is less than $600 in pay, I don’t think you even need to 1099 them, let alone W2 them. If they worked for an hour, pull $20 out of your pocket and tell them to go piss-off!


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## bwiab (Mar 17, 2006)

IRS 20-Factor Test: Independent Contractor or Employee 
Basic Question: Who Has Control Over the Work Being Done? 

1. Instructions. Workers who are required to comply with others’ instructions about when, where, and how they 
are to work are ordinarily employees. 

2. Training. Training workers indicates that employers exercise control over the means by which results are 
accomplished. 

3. Integration. When the success or continuation of a business depends on the performance of certain services, 
the workers performing those services are subject to a certain amount of control by the owners of the businesses. 

4. Services rendered personally. If services must be rendered personally, employers control both the means and 
the results of the work. 

5. Hiring, supervising, and paying assistants. Control is exercised if employers hire, supervise, and pay 
assistants. 

6. Continuing relationships. Continuing relationships between workers and employers indicate that employeremployee
relationships exist. 

7. Set hours of work. The establishment of set hours of work by employers indicates control. 

8. Full-time required. If workers must devote full time to employers’ businesses, employers have control over 
workers’ time. Independent contractors are free to work when and for whom they choose. 

9. Doing work on employers’ premises. Control is indicated if the work is performed on employers’ premises. 

10. Order or sequences set. Control is indicated if workers are not free to choose their own patterns of work but 
must perform services in the sequences set by the employers. 

11. Oral or written reports. Control is indicated if workers must submit regular oral or written reports to 
employers. 

12. Payment by hour, week, or month. This points to employer-employee relationships, provided that this 
method of payment is not just a convenient way of paying a lump sum agreed on as the cost of a job. 
Independent contractors are usually paid by the job or on straight commission. 

13. Payment of business and/or traveling expense. Employers paying workers’ expenses of this nature shows 
that employer-employee relationships usually exist. 

14. Furnishing tools and materials. If employers furnish significant tools, materials, and other equipment, 
employer-employee relationships usually exist. 

15. Significant investments. Workers are independent contractors if they invest in facilities that are not typically 
maintained by employees (such as an office rented at fair market value from an unrelated party). Employees 
depend on employers for such facilities. 

16. Realization of profits or losses. Workers who can realize profits or losses (in addition to profits or losses 
ordinarily realized by employees) they are independent contractors. Workers who cannot are generally 
employees. 

17. Working for more than one firm at a time. If workers perform services for a number of unrelated persons at 
the same time, they are usually independent contractors. 

18. Making services available to the general public. Workers are usually independent contractors if they make 
their services available to the general public on a regular and consistent basis. 

19. Right to discharge. The right of employers to discharge workers indicates that the workers are employees. 

20. Right to terminate. Workers are employees if they have the right to end their relationships with their principals 
at any time without incurring liability.


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## EricBrancard (Jun 8, 2012)

1099 is for NON-employee compensation. It's right on the form.


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## Randy Bush (Mar 7, 2011)

EricBrancard said:


> 1099 is for NON-employee compensation. It's right on the form.


Some people are challenged and can't read writing.


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## Anti-wingnut (Mar 12, 2009)

We can't get enough of these threads


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## BThomas (Apr 21, 2013)

drich
Your accountant is correct. Temporary employees can be given a 1099 but they must be made aware that you are not withholding anything from their pay and that they will be responsible for all taxes and withholdings when they file their returns. ( if they file)
When you say they don't work a long period time - a day - a week a month. The longer they work the more they become employees who would get a W2. I usually work alone and occasional employees get 1099's . I did have one year with a large project that lasted 6 months and the employee got a W2 that year. And I had to take all the withholdings and send them in monthly.
Bill T


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## Anti-wingnut (Mar 12, 2009)

BThomas said:


> drich
> Your accountant is correct. Temporary employees can be given a 1099 but they must be made aware that you are not withholding anything from their pay and that they will be responsible for all taxes and withholdings when they file their returns. ( if they file)
> When you say they don't work a long period time - a day - a week a month. The longer they work the more they become employees who would get a W2. I usually work alone and occasional employees get 1099's . I did have one year with a large project that lasted 6 months and the employee got a W2 that year. And I had to take all the withholdings and send them in monthly.
> Bill T


I'm going to say that your all wet, and have no idea of what you're talking about



> Form 1099-MISC
> Form 1099-MISC (PDF) is most commonly used by payers to report payments made in the course of a trade or business to others for services.
> *If you paid someone who is not your employee, such as a subcontractor, attorney or accountant $600* or more for services provided during the year, a Form 1099-MISC (PDF) needs to be completed, and a copy of 1099-MISC (PDF) must be provided to the independent contractor by January 31 of the year following payment. You must also send a copy of this form to the IRS by February 28 (although the form does not have to be sent to the IRS until March 31 if the business files the 1099s electronically, using the FIRE system).
> Also note that independent contractors may have their own employees or may hire other independent contractors (subcontractors). In either case, they should be aware of their tax responsibilities, including filing and reporting requirements, for these workers.


http://www.irs.gov/Businesses/Small...-Associated-Taxes-for-Independent-Contractors


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## Mr Latone (Jan 8, 2011)

Hmmm..

as in many things IRS, there is interpretation.

Suppose you land a job that is outside of your normal size and you are under time constraint to complete. The job duration is eight working days. You decide to staff an extra three workers for the job. You absolutely will not "hire" these three workers beyond the eight day job duration.

Is the above W2 or 1099?

Even with the list provided by bwiab above, the points used to determine employment are left for interpretation. While the interpretation is ultimately that of the IRS, not the contractor who provides the work, there is still interpretation.

If you have good records for your business, specifically for those who perform work under your contracts, you could certainly make a case for 1099 compensation in the above example.

Conversely, when bringing people onto a job site under the guise of 1099 workers with no insurances and no business identity, there certainly exists a case for the IRS to interpret them as employees and hold the contractor accountable for the normal W2 requirements.

Further, it's not just the federal gov't who is interested in the contractor/worker relationship. State taxing authorities and insurance policies which a contractor holds may interpret independently that a worker will be treated as an employee for taxes and premium liability.

There are, without a doubt, many workers who receive 1099s who should be under the W2 rules.


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## Anti-wingnut (Mar 12, 2009)

Mr Latone said:


> Hmmm..
> 
> as in many things IRS, there is interpretation.
> 
> ...



They'd get a W2


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## Randy Bush (Mar 7, 2011)

Anti-wingnut said:


> They'd get a W2


Also with this type of situation what do you do about WC? If the guy gets hurt on the job you will get get stuck paying . The only reason I see for giving a employee a 1099 is to get out of paying things that you are legally required to.


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## Mr Latone (Jan 8, 2011)

Anti-wingnut said:


> They'd get a W2


I would go that way as well.

So I was on the phone the other day with the IRS. As a roofing contractor in the northeast I often do not keep employees for Jan, Feb and March. As a seasonal employer, I may not have the requirement to file 941 for the 1st quarter of some years.

So I was talking to the guy (IRS) on the phone about a missing 941 for a year I had no employees during the first quarter. He was speaking generally about construction work and how winters are often slow. He made a specific reference to the kind of scenario I posted about and _seemed_ indicate that a 1099 would be appropriate.

I have not had that type of situation. I know I have too much liability to pretend a W2 can be replaced with a 1099. I was just posing the scenario based on a conversation I had.


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## ranteso (Nov 11, 2010)

Randy Bush said:


> Also with this type of situation what do you do about WC? If the guy gets hurt on the job you will get get stuck paying . The only reason I see for giving a employee a 1099 is to get out of paying things that you are legally required to.


Bingo! 

Those that 1099 their so called "independent" workers, subs or whatever makes you feel good calling them, just see how fast they turn into employees when they get hurt and the comp board gets involved, and that's just the beginning. The State Dept of Labor will have fun with you too.


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## BThomas (Apr 21, 2013)

I don't understand some of the thinking here.
Workers comp covers employees AND those temp workers that get a 1099. The Workers comp auditor will ask if the 1099 guys have their own insurance ( and if so proof ) and if they don't than they fall on your policy. Just make sure you allow the additional burden cost when you estimate your jobs. 
Bill T


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## Anti-wingnut (Mar 12, 2009)

In non-captive states, WC covers who you ask the insurance company to cover. In captive states, WC only applies to those who are employees and receive a W-2.


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## KennMacMoragh (Sep 16, 2008)

BThomas said:


> drich Your accountant is correct. Temporary employees can be given a 1099 but they must be made aware that you are not withholding anything from their pay and that they will be responsible for all taxes and withholdings when they file their returns. ( if they file) When you say they don't work a long period time - a day - a week a month. The longer they work the more they become employees who would get a W2. I usually work alone and occasional employees get 1099's . I did have one year with a large project that lasted 6 months and the employee got a W2 that year. And I had to take all the withholdings and send them in monthly. Bill T


 Mind telling us where you get your information? Being it contradicts everything I've been told from proper authorities, i.e, accountants, attorneys, department of labor and industries for my state. I don't know what state you're in but you should cite your source before giving advice that could land someone a fine, or liability when someone gets injured on the job.


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## Anti-wingnut (Mar 12, 2009)

KennMacMoragh said:


> Mind telling us where you get your information? Being it contradicts everything I've been told from proper authorities, i.e, accountants, attorneys, department of labor and industries for my state. I don't know what state you're in but you should cite your source before giving advice that could land someone a fine, or liability when someone gets injured on the job.


BThomas is completely wrong, but remember that you Kenn, live in one of only four captive states in the union.

Regardless, 1099's and W-2 are all Federal, so that isn't going to matter. Employees who earn more than $600 must be given a W-2. There is absolutely no such thing as a temporary worker, where the onus for FUTA, SS and other taxes normally paid by the employer can be forced onto the employee by fiat and "notification".

I suggest BThomas read this and Publication 15
http://www.irs.gov/publications/p15a/ar02.html#en_US_2014_publink1000169463


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## Chopsaw Chick (May 6, 2011)

In WA State, you cannot 1099 anybody in the construction industry unless they are an established contractor in their own right. They must be licensed, bonded, insured and be a separate company from your own company - even if they otherwise meet IRS guidelines for being an independent contractor. Labor and Industries is very clear about this and your own liability insurance company probably is too. Here is a link to the WA State Independent Contractor Guide:

http://www.lni.wa.gov/formpub/Detail.asp?DocID=2134

Aren't you glad the government makes a guide for everything!??? :thumbsup:


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## Anti-wingnut (Mar 12, 2009)

Chopsaw Chick said:


> In WA State, you cannot 1099 anybody in the construction industry unless they are an established contractor in their own right


Not true. From your very own link:


> A person can be an independent contractor for federal tax purposes but still be a covered worker for Washington State workers’ compensation purposes.


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## clydebusa (Apr 27, 2014)

BThomas said:


> I don't understand some of the thinking here.
> Workers comp covers employees AND those temp workers that get a 1099. The Workers comp auditor will ask if the 1099 guys have their own insurance ( and if so proof ) and if they don't than they fall on your policy. Just make sure you allow the additional burden cost when you estimate your jobs.
> Bill T


This is true. If you 1099 you carry WC or they provide proof they are covered.


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## Tinstaafl (Jan 6, 2008)

ElectricRoss said:


> Do I ask for his company name and insurance and paying him 1099, or do I still employ him as a W2 employee and also including his workers on my payroll?


Well, is he independent or not? If so, he needs his own insurance and you would 1099 him. Otherwise, he and the other guys get a W-2 and do what you say, when you say.


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## Randy Bush (Mar 7, 2011)

ElectricRoss said:


> One of my workers just became independent, and started paying 2 other guys to work for him. He still wants me to hire him for my projects. Do I ask for his company name and insurance and paying him 1099, or do I still employ him as a W2 employee and also including his workers on my payroll?
> 
> I don't think he has been set up with insurance or anything like that.


Sounds like the kind of situation you could get yourself in a jam over. With him having employees you need to make sure he has WC on them or be willing to put them on your payroll. Because guess who will be providing WC if one of them get hurt or Labor and Industry shows up on the job.


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