I’m going to get right to the point.
In the auto detailing and reconditioning business 1099 contractors are almost always employees.
Almost always is probably shooting low.
Most auto detailing and reconditioning businesses fail nearly all of the IRS criteria for classifying workers as 1099 contractors instead of W2 employees.
I know this may surprise some of you reading this, but if you didn’t think this was the case you probably wouldn’t be here.
I wrote 5 reasons your 1099 contractor is actually your employee to highlight this important compliance subject for small businesses.
Contractors Handled Everything Without Any Input From Me
In over two decades in the detailing business, the only we utilized actual contractors was to pick up slack in our car window tinting business.
A few members of my tinting team that had been with us for many years asked me one day about the possibility of starting their own tinting business.
I told them no problem and we would be happy to continue giving them overflow work.
I even rented a bay in one of my shops to them and they stayed there for years.
It worked out great for everybody and they are still friends of mine years later.
Here’s why I mentioned this. When it came to jobs from us, I never told them how to do anything.
I just let the guys know when we had car windows to tint and the contractors handled everything from there without any input from me.
After they were done tinting a car, they left an invoice in my inbox.
That is what a true 1099 contractor looks like.
5 Reasons Your 1099 Contractor is Actually Your Employee:
- The contractor is a properly licensed business that is in business to perform the type of work you are hiring them to do. Is your employee actually a licensed business? Do they have any other clients or customers? These are all important issues that the IRS looks at.
- The contractor owns their own equipment and doesn’t need to “borrow” your equipment to complete the work. Does your employee own their own equipment?
- The contractor has the expertise to do the job you are hiring them to do with no direction or training from you on how to do the job. Does your employee work at your direction, when, how and where you tell them to work?
- The contractor has their own business liability insurance to protect you if they damage your property. This is a big item and one of the easiest ways your insurance carrier and the IRS will catch you mis-classifying employees as contractors.
- The contractor will complete the work and invoice you. Does your employee complete a time sheet? Do they complete a per car checklist that you assign? All of these systems are historically tried and true employee tracking systems.
With tax time upon us, it’s a good idea to take a few minutes and think about ways to reduce your tax liabilities and make sure you are in compliance.
Penalties and interest are two words you don’t want to ever deal with as a taxpayer or business owner.
5 Reasons Your 1099 Contractor is Actually Your Employee
Starting a new year is a great time to get your business tuned up and in compliance. If you are reading this, you’re probably already thinking that you may not be following the rules regarding 1099 contractor compliance.
This post is just a quick summary post about the subject. If you are interested in more details, please check out our “Detail Shop 1099 Contractor” page here on AutoDetailGuide.com.
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