question for discussion about 1099's

Discussion in 'Business Operations' started by lawnwizards, Mar 28, 2006.

  1. lawnwizards

    lawnwizards LawnSite Silver Member
    Posts: 2,434

    here recently people have talked about employing people and sending 1099's out instead of witholding taxes.. my question is, (for sake of argument) what if you were to rent out your equipment to the people you send the 1099's to. for example... you normally pay your trimming guy $10 per hour.. you up it to $11 and charge him $1 per hour rent... as for setting the working timetable, maybe someone else has any idea about this.... not trying to break the law, just starting a 1099 discussion... all input is appreciated.:waving:
     
  2. lawnwizards

    lawnwizards LawnSite Silver Member
    Posts: 2,434

    come on guys and gals, just because you comment doesn't mean you're breaking the law... this is just for discussion...
     
  3. HighGrass

    HighGrass LawnSite Bronze Member
    from Z5 MA
    Posts: 1,237

    I think at some point and audit would bite you.
     
  4. John from OH

    John from OH LawnSite Member
    Posts: 144

    Is there really anything to discuss? I think the IRS guidelines don't leave much wiggle room on this issue. Play by their rules, sleep at night. Payroll expenses are a part of business. Add them in your rates, paythe government when the taxes are due. Its not as hard as it sounds and not as expensive you think since you are recovering the money through pricing.

    If you think that you'll take a $10 per hour employee, give them an extra buck, and then take the extra buck back in rental, will make them happy, I think your kidding yourself. They then would get to pay liability insurance, self employment taxes, book keeping and other misc. expenses out their $10.
    Does this sound like a good deal to you?
     
  5. lawnwizards

    lawnwizards LawnSite Silver Member
    Posts: 2,434

    calm down bro... $10 dollars is just a number i threw out... plug in your own number and see how it works... remember, this is just a hypothetical situation. it doesn't apply to anyone....
     
  6. gce_ent

    gce_ent LawnSite Member
    from Texas
    Posts: 93

    Nothing illegal when playing by the rules.

    The laws for 1099 are the following:

    - They cannot be in your equipment
    - You cannot give give them hours to work
    - You cannot tell them where to work
    - They have to sign the 1099 form

    So as you can see there are many ways in our business to have workers be 1099. I am not going to spell it out for you here because too many people will wine and b!tch because they refuse to play within the boundries setup by our govenment. That is their loss.

    I do it for my other businesses and am completely in line with the law so if the IRS wants to sit out in the garage of my CPA in the 100 degree heat and review my info so beit.
     
  7. John from OH

    John from OH LawnSite Member
    Posts: 144

    Remember, you can't hear voice tone online. I'm not upset or hyper. I am to the point, that's my personality. If you were sitting accross from me, the tone would conversational, the wording pretty much the same. The answer may not be what you want to hear, but I stand by my statement.

    I realize this is a hypothetical question, but you have to remember, the tax people set the rules, and the rules just don't allow much leeway. Without much leeway, there is little to discuss. I just don't want to see someone new to the industry read these posts and decide to set up his employees as subs and then 1099 them. The penalties are not worth it.

    In your words "employing people and sending 1099's out instead of witholding taxes.. ".

    My unput into the discussion is that this is not the area to try to beat the tax man. It just isn't legal, hence is there really anything to discuss?

    Legitmate subcontractors are a whole different subject. They will set the pricing to recoup all of their costs, you pay the invoice when they hand it to you.
     
  8. grandview (2006)

    grandview (2006) LawnSite Gold Member
    Posts: 3,466

    Try this and work backwards. How much would the find be plus back tax you owe divide that by the hrs worked by your guys.Would it be better just to pay them as employees? Don't forget piss one off and they call the tax man on you.
     
  9. John from OH

    John from OH LawnSite Member
    Posts: 144

    The laws for 1099 are the following:

    - They cannot be in your equipment
    - You cannot give give them hours to work
    - You cannot tell them where to work
    - They have to sign the 1099 form

    There are about 20 requirements to meet, a search of old posts should bring up the list as I have seen it posted on here.

    Just to clarify - #4 is actually the W-9 Request for Taxpayer Identification Number and Certification. This is signed up front.

    The 1099 is issued by the payer to the payee by the end of January. A copy is also sent to the IRS for matching.
     
  10. gce_ent

    gce_ent LawnSite Member
    from Texas
    Posts: 93

    Actually the document I was refering to is the TWCC85 Form. I attached it for your reference.
     

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