1099 empoyees--legal

Discussion in 'Business Operations' started by hustlers, Apr 20, 2003.

  1. hustlers

    hustlers LawnSite Senior Member
    from MN
    Posts: 257

    I have a friend in the business and he 1099s his
    employees so he can get the deduction without
    paying workers comp/

    Is is legal to 1099 an employee so they are a subcontractor
    and not an employee, even though they get paid by the hour.
    he is definitely an employee not a sub

    The employee/subcontractor is getting ripped off cause he
    has no insurance, liability, no writeoffs.?????right or wrong

    Is this ok or crooked?? I have done everything legit but
    i want know what you think about this other bus. owners decision
    before i ever try it
  2. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    He is breaking the law...no question. Maybe Bruce Stansberry will view this thread and shed some light for you...and your idiot friend.
  3. John Allin

    John Allin LawnSite Bronze Member
    Posts: 1,489

    It's as illegal as it gets......
  4. landscaper3

    landscaper3 LawnSite Bronze Member
    Posts: 1,354

    Yes and never get caught! You will be paying fines out of your tush!!!!!!!!! Workers comp is the ONLY way to do it right.
  5. Doc Pete

    Doc Pete LawnSite Gold Member
    Posts: 3,469

    As I was told, if the worker doesn't have WC, it falls back on the one paying the worker. If he doesn't pay the WC, the worker can sue him...... It's been done, to the tune of $18,000. The worker told the employer either you pay me $18,000 for "lose of use" or I go the state WC bureau.........
  6. bruces

    bruces LawnSite Senior Member
    Posts: 648

    Probably not illegal. Work comp depends on the laws of each state.

    From the IRS standpoint there is probably no way they are not employees. They should be employees, payroll taxes withheld, etc.

    What will he do when someone gets hurt and turns in a workmen's comp claim. The "contractor" will forget that he said it was ok to get a 1099.

    Or one will go file for unemployment after they are fired. Then the state will determine that they were an employee and you are subject to back payroll taxes.

    And then the state will share that information with the IRS and they will want their back taxes.

    And then your friend won't have enough money to pay the taxes and fines.

    And then.........

    Out of business!!

    Moral of story, do it right to start with!
  7. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Posts: 1,913

    He is gambling with the devil .... n the IRS NEVER loses ..... the back pay on W/C & Payroll taxes ..... That's gonna leave a mark

    All it takes is 1 accident or 1 "sub contractor" to make a phone call

    Get the W/C even if not required by your state (less than 3 employees)

    Educate customers that you have it & what it means to them
  8. Got Grass?

    Got Grass? LawnSite Senior Member
    Posts: 363

    As far as I thought (I know almost nothing about this kinda stuff) if the person get paid by the hr then they are automatically your employee.
    If they work FOR you they are an employee. If you contract another company out to work then they are a sub.
    A subcontractor provides his own means of completing the work, truck tools etc.. I assume you can lease something to him but then it would get tricky. He can choose when to work, how & when the work gets done. He can hire anyone he wants to help him with the work. Providing they are an employee of his & not another sub contractor (if thats in the agreement)...

    So, basically you can provide your subcontractor with a spec. sheet for the job. Such as material (stone/mulch etc...) types & amounts (Install a depth of 3-6" etc...), equipment limits (no dumps or skids on the property), A start & finish deadline (salt the lot by 7am, finish the install by wed. so the sod guys can come in Thursday.etc...). etc...etc... & so on...
    The rest is up to the sub....

    I could be completely wrong but like I said I don't know.
    I would also like to hear others comments & tips for the use of subcontractors.
    This is defiantly a complicated matter you NEED & MUST discuss with your lawyer & accountant about. The smallest detail can lead you to massive fines & quite possibly shut you down for good.
  9. A1 Lawn@Landscapes

    A1 Lawn@Landscapes LawnSite Member
    Posts: 220

    Go to the IRS website. Their is a 20 question worksheet there to determine if someone is an employee or a sub.
  10. If they work for you they are employees no matter what method of pay they receive.

    To qualify as a sub in this instance they must pay their own bills, have their own ins, have their own truck and equipment, pay for their own gas, etc.....They must also be a registered company

    You write company a check.

    There are a few small loop holes to this, but I wont post them publicly and they really don't prettier this matter.

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