Helpers with 1099 status


#1

The thought of hiring has crossed my mind lately as we expand and will require help from people I haven’t known my entire life, that I trust. I’m very uneducated on the subject and have been reading alot about it. I have a meeting with our lawyer Tuesday to discuss Ohio’s laws on the matter.I would like some opinions from my peers that have already overcome this situation.
What are your opinions on part time helpers that you 1099 as subcontractors. How would you handle a workplace injury. What are some steps you take to cover your liabilities in a worst case scenario situation. All opinons welcome. Facts appreciated. Thanks in advance.


#2

You can’t 1099 a worker unless he has his own tools and equipment and doesn’t have to report for duty at any specific time. In essence, he cannot work for you, only do work for you, at his discretion.


#3

RS Small Business Week Tax Tip 2017-02, May 1, 2017

The IRS encourages all businesses and business owners to know the rules when it comes to classifying a worker as an employee or an independent contractor.

An employer must withhold income taxes and pay Social Security, Medicare taxes and unemployment tax on wages paid to an employee. Employers normally do not have to withhold or pay any taxes on payments to independent contractors.

Here are two key points for small business owners to keep in mind when it comes to classifying workers:

Control. The relationship between a worker and a business is important. If the business controls what work is accomplished and directs how it is done, it exerts behavioral control. If the business directs or controls financial and certain relevant aspects of a worker’s job, it exercises financial control. This includes:

The extent of the worker’s investment in the facilities or tools used in performing services
The extent to which the worker makes his or her services available to the relevant market
How the business pays the worker, and
The extent to which the worker can realize a profit or incur a loss

Relationship. How the employer and worker perceive their relationship is also important for determining worker status. Key topics to think about include:

Written contracts describing the relationship the parties intended to create
Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation or sick pay
The permanency of the relationship, and
The extent to which services performed by the worker are a key aspect of the regular business of the company
The extent to which the worker has unreimbursed business expenses
The IRS can help employers determine the status of their workers by using form Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. IRS Publication 15-A, Employer’s Supplemental Tax Guide, is also an excellent resource.


#4

From my understanding these laws change from state to state. Is that correct?


#5

These are Federal laws. IRS tax code. What might change is the local state laws regarding state unemployment and or workers comp.


#6

Dude you changed your picture… I was like who is that lol


#7

Actually @marinegrunt changed it. I just tweaked it a bit, lol


#8

They really should make laws more friendly to smaller businesses with part time employees. Guess I’m going to have to figure out the proper way to do things and just jump right to a full time guy >.>


#9

I totally agree. If I pay a guy $14 per hour it’s actually about $16-$18 hour after I factor in taxes, and worker’s comp.


#10

I got burned on this years ago when I ran a horse carriage business…@Steve nailed it. They basically have to provide everything for the job. You are only allowed to dictate the completion date and standard of quality for the work they do. They definitely should not wear your company shirts!


#11

If you need any help, let me know. It’s homestly not to hard.

I use Patriot Software to run my payroll…and they help you get everything set up.

Have employee fill out state and federal W4 and go input the info into Patriot Software.

Every week I go in and punch in how many hours and it automatically deducts all the necessary taxes and send a direct deposit to employees bank. (I’ll give them the pay stub that I print)

Patriot Software has a workmen’s comp company they work with, I use them. It’s automatically tied to payroll and Patriot Software sends them your payroll report every week and they auto deduct from your business bank account.

That’s honestly it. On the legal side


#12

Patriot Software notifies the state of new employee.

Only other thing you’d need to do is get a unemployment insurance acct from your state.Patriot can help you though if you can’t figure it out.


#13

I’ve thought of expanding as well. My idea was to hire a worker from a temp agency. No dealing with drug addicts and no shows from craigslist. They’ve been vetted by the temp agency, even if minimally, and if they’re coming in from a temp agency, I know they’re looking to work. Not make some cash at the end of the day and dip on me. If I don’t like the person, I tell the agency and get someone new the next day. If I like someone, I can request to keep them coming back.

The only downside is I need to keep them busy or notify the agency or I’m charged for 4 hours minimum and I have to either use the temp agency for 6 months with a certain individual or pay a royalty to hire someone if I find a rockstar.

Otherwise, the agency is in charge of payroll, taxes, insurance, etc. I only pay the agency and that’s that. I don’t have to worry about the paperwork, hr, etc.


#14

My company does this. The only major downside is that a $10 an hour guy gets turned into a $15 an hour guy because the temp agency charges WAAAAY over what the guy gets. Major plus is that if they get hurt they have to call the agency and go where they say because it’s on their workman’s comp, and as you said, all you have to do is call and say “I didn’t like Billy, send me someone else tomorrow”…and you don’t even have to talk to the temp about it.

My boss insists on interviewing the people prior to allowing the temp agency to send them…my previous boss just said “get two people in here”…I’ve found it is best to meet them first.


#15

If you are a PWRA member @JessicaPWR there is a payroll company that gives an incredible discount to members and handles all payroll issues. I think I pay $39 a month or something crazy cheap like that.


#16

Yes PWRA Payroll for members is a crazy good discount. 39.95/Month.

It’s through SurePayroll which is basically an extension of Paychex, which is a huge company so you are not dealing with some “fly by night” service.

I’m here if there are any members interested :slight_smile:


#17

I pay $30 a month through Patriots Software.

Customer service is great!