If It Quacks Like a Duck…
By Gina Beckman, 10 til 2 Marketing Director
WHAT IS A 1099 CONTRACTOR?
A “1099 worker” is also referred to as an “independent contractor”. “Contractor” is a legal term for a person or firm that enters a contract to perform a service or provide a product in exchange for valuable consideration. Valuable consideration includes monetary pay, goods, services, and more. 1099 is the tax form that these workers use for the IRS.
IS THIS A 1099 WORKER?
The IRS has a guide that helps define 1099 workers by establishing criteria for employees, non-employees and independent contractors. Some of the points the IRS considers include:
• Behavioral control – the extent to which the hiring company controls and directs the worker.
• Instructions the business provides to the worker – the worker’s freedom in choosing when and where to work, what tools to use, where to purchase supplies, where to purchase related services, what work must be performed by a specified individual, whether subcontractors are permitted, and more.
• Training provided to the worker — independent contractors usually use their own methods to carry out work.
• Financial control – independent contractors usually have unreimbursed expenses, make a significant investment in the facilities they use to carry out work, invoice by flat fee/rate or some other method than a regular wage, and end up in a situation where they face a profit or loss.
• Relationship type — independent contractors have written contracts, no benefits, non-permanent relationships, non-core functions, and the freedom to work for other companies.
WHY DO I CARE?
If you use a 1099 employee the IRS assumes certain criteria are met. If the person working does not meet these criteria, you may be liable for back taxes, fines or even jail time.