5 Reasons Your 1099 Contractor is Actually Your Employee

I’m going to come right out and say it. 1099 contractors are almost always employees. Almost always is probably shooting low because as far as detail shops and similar businesses, you fail the IRS criteria test probably over 90% of the time.¬†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 reading this. I wrote 5 reasons your 1099 contractor is actually your employee to highlight this important compliance subject for small businesses.

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The Contractors Handled Everything Without Any Input From Me

In over two decades of business, the only time my detailing companies ran into a situation where we utilized actual contractors was to pick up slack in our tinting business. I had a few guys that had started with us and came to me after a few years to ask if they could go out and start their own tinting business. I told them no problem as long as we could still send them some of our 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. I never told them how to do anything. I just let them know when we had cars to tint and the contractors handled everything 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:

  1. 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.
  2. 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?
  3. 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?
  4. 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.
  5. 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.

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 “5 Reasons Your 1099 Contractor is Actually Your Employee” is just a quick summary post about this subject. If you are interested in more details, please¬†check out our “Detail Shop 1099 Contractor” page here on AutoDetailGuide.com.

We hope you enjoyed this “how to” tip sheet. Access more tips, training, and insight by subscribing to the AutoDetailGuide.com E-Newsletter. We are also very active on Facebook, Twitter, and Google+.

Suggested Pages to Check Out

Detail Shop Liability Insurance Page with Info on Garage Keepers Liability Coverage

1099 Contractors and Other Detail Shop Tax Issues

Go Back To Home Auto Detailing Step-by-Step Page

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