The Treasury Inspector General has begun a crackdown on 1099 reporting, finding the 19% of small businesses are improperly classifying 1099’s that should be employees. You can expect audits on this.
If you have 1099 employees, it is important to be aware that the IRS has a 20 question list, below. If the answer is YES to even one of these questions, the person is an employee, not a 1099!
1. Is the person providing services required to comply with instructions about when, where, and how the work is to be done?
2. Is the person provided training to enable them to perform a job in a particular method or manner?
3. Are the services provided integrated into the business’ operation?
4. Must the services be rendered personally?
5. Does the business hire, supervise or pay assistants to help the person performing the services under contract?
6. Is the relationship between the individual and the person they perform services for a continuing relationship?
7. Who sets the hours of work?
8. Is the worker required to devote their full time to the person they perform services for?
9. Is the work performed at the place of the business of the potential employer?
10. Who directs the order or sequence in which the work must be done?
11. Are regular written or oral reports required?
12. What is the method of payment – hourly, commission or by the job?
13. Are business and/or traveling expenses reimbursed?
14. Who furnishes tools and materials used in providing services?
15. Does the person providing services have a significant investment in facilities used to perform services?
16. Can the person performing the services realize both a profit or a loss?
17. Can the person providing services work for a number of firms at the same time?
18. Does the person make their services available to the general public?
19. Is the person providing services subject to dismissal for reasons other than nonperformance of contract specifications?
20. Can the person providing services terminate their relationship without incurring a liability for failure to complete a job?