Legal Question in Business Law in Pennsylvania

If a small business gives their employess a 1099-form each year for tax purposes, does that automatically qualify those employees as sub-contractors?


Asked on 11/12/11, 7:28 pm

2 Answers from Attorneys

Nancy Delain Delain Law Office, PLLC

Absolutely not.

IF YOU ARE THE EMPLOYER:

Unless your "employees" meet the stringent test put forth by the IRS, they are NOT independent contractors. If you're calling them "employees," it is very, very likely that you should be paying them on a W-2, withholding taxes from their pay, and paying the employer's portion of federal and state taxes.

You need to contact a tax attorney or CPA (yes, that means pick up the phone and call one; bite the bullet and pay for that professional's time and advice) if you have any questions about whether the people who work for you are W-2 employees or 1099 contractors. Getting this wrong could present a big-time tax problem for you. The price of an hour or two with a CPA or tax attorney is well worth staying away from the massive penalties that often result for an employer who gets the tax status of their employees wrong.

You can almost never go wrong by treating those who work for you as W-2 employees; you can easily go wrong by treating employees as 1099 contractors. Pay a professional to help you get this right.

IF YOU ARE THE EMPLOYEE:

Make absolutely certain that ALL of your taxes � both employer and your portions � are paid timely. If your employer is paying you on a 1099, your employer is not contributing their portion of your taxes, which puts the full tax burden on you. Understand that you may be able to go after your employer for contribution of their portion of your taxes after the fact, but get those taxes paid before the IRS comes breathing down your neck. You, too, need a CPA or a tax lawyer to help you out with this.

THIS POST CONTAINS GENERAL INFORMATION AND IS INTENDED FOR ENTERTAINMENT PURPOSES ONLY. IT DOES NOT CONSTITUTE LEGAL ADVICE, NOR DOES IT CREATE ANY ATTORNEY-CLIENT RELATIONSHIP. FOR LEGAL ADVICE ON YOUR PARTICULAR MATTER, CONSULT YOUR ATTORNEY.

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Answered on 11/12/11, 8:26 pm
Glenn Brown Real World Law, P.C.

No!!!

Why do u ask?

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Answered on 11/13/11, 1:44 pm


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