1099 Employee: Everything You Need to Know | UpCounsel

Updated June 25, 2020:

What is a 1099 Employee?

A 1099 employee is one that does n’t fall under normal use classification rules. independent contractors are 1099 employees. alternatively of having a permanent wave worker that takes focus from the company, your business would use an independent contractile organ who works under their own steering .
The dispute between a 1099 employee and others is normally easy to recognize. One example of an independent contractor is a cougar hired to paint your home. They will not be your employee after finishing the job .
If you need a permanent wave employee, the 1099 distinction is not correct. person who has to show up to the agency, follow a company dress code and constantly answer to their supervisory program is most probable a traditional employee.

Why is the 1099 Employee designation important?

The 1099 employee appellation is authoritative due to taxes. If you hire an freelancer contractor, you avoid a large tax charge. The 1099 employee typically handles their own taxes .
If you have a traditional employer-worker relationship, you must pay several taxes, including :

  • medicare
  • Social Security
  • unemployment
  • income

In summation to paying Medicare and Social Security taxes, you must besides withhold these taxes from the paychecks of employees. Avoiding this can be beneficial to your company, but falsely designating person as a 1099 employee can get you into trouble .
Flowers Foods, a Georgia ship’s company, was sued after their drivers claimed they were cheated out of “ tens of millions of dollars ” due to being misclassified. In 2015, FedEx ended up paying $ 228 million due to incorrect categorization .
The 1099 employee appellation is an authoritative one, and you can not afford to make a mistake .

Do not designate someone as a 1099 Employee if:

  • company provides train on a certain method of job performance .
  • Tools and materials are provided .
  • Employees must follow typeset schedule .
  • You provide benefits such as vacation, overtime wage, etc .

There are sometimes nuances to these rules. In the “ hiring a painter ” example, you will likely pay for the paint and supplies needed for the job. This does not make them a traditional employee, so you must consider the stallion employer-worker relationship .

Designate someone as a 1099 Employee if:

Examples of what a 1099 Employee vs. W2 Employee

You may not have to go through the concern of figuring out who qualifies as a 1099 employee. If you have any of the following workers, they probably are n’t 1099 employees .

  • Office secretary .
  • waitress at restaurant .
  • Cashier .
  • Call center representative .
  • Line worker .

If you occasionally use any of the follow workers, they are likely 1099 employees .

  • Freelance writer .
  • Truck driver who can turn down routes .
  • Plumber .
  • electrician .

Common mistakes with 1099 Employee

  • not having a written agreement that contractor will be independent of master .
  • Exercising besides much restraint over independent contractile organ .
  • Basing categorization on industry norms .
  • Failing to file Form 1099-MISC .

Frequently asked questions

  • What forms do I file?
    For traditional employees, file a W-2. For freelancer contractors, file the 1099-MISC .
  • What if I incorrectly classify a worker?
    Companies that misclassify workers could pay huge fines and be apt for money owed to employees.

  • Do I need a written contract with a 1099 employee?
    It ‘s not normally legally required, but doing so will protect your business .

Steps to file a 1099 Employee

If you ‘re using a 1099 employee, you will first want to create a written contract. If you pay them $ 600 or more over the course of a year, you will need to file a 1099-MISC with the IRS and send a copy to your contractile organ .
If you need help with employee classification or filing the appropriate paperwork, post your indigence in UpCounsel ‘s marketplace. UpCounsel screens out 95 % of lawyers so you ‘ll only receive the best legal help .

Related Posts