Looking to hear how other smaller companies like myself are finding the best way to treat their guys? I have a full time crew of 13 and I've found hiring them as 1099 workers is a better deal for both of us instead of W2. I went this way back when the "Unaffordable Care Act" kicked in and I could no longer get a competitive health plan for my guys compared to just going out into the new healthcare market on their own. Being able to deduct for their vehicles as a 1099 hire also helps them stay in a lower tax bracket while having the same expenses of driving to work as they would as a W2 employee. They do have to make up their share of SS that would be paid by the employer for a W2 employee, but I balance that in house and am able to contribute that to their IRA's out of my pocket, or cut them a bonus check if they prefer that way. Id love to hear about more ways I may not have even thought about to better take care of my guys.
How about actually paying them as if they are employee's instead of "independent contractors". If you close down tomorrow, they aren't eligible for unemployment insurance. If they get torn up at work, there's no workers compensation disability for them (because we both know that they aren't buying self employed independent contractors disability insurance). There's no social security. And you are passing that cost on to everyone else. If you are telling them what time to show up, what time they are leaving, what equipment they are running, providing that equipment, and assigning what they are going to get done today, you're their employer, and they're your employee. If you're telling them, "you need to move x # of cubic yards this week" and they get that done by tuesday afternoon with their own equipment, and they kick off and go fishing the rest of the week, then they are 1099's. 1099 is a great deal for the "employer", and the shi**y end of the stick for the "employees". If this is how you refer to them, you don't have to make any excuses that they are really "independent contractors" - because we both know what they really are. If you really care about your guys, treat them that way. If tomorrow, one of my guys drives through a intersection and hits two nuns on the way to feed the homeless while on the way from the puppy rescue center, I'm liable, they are my guys and my employee's running my equipment. If one of your guys misjudges with the excavator bucket and wipes out the articulated truck cab, you can't just wring you hands and "ohh, that's too bad, they are independent contractors". 1099 is a scourge on the construction industry.
My thoughts on this, this isn't a "one size fits all" question. I've been both in my life, 1099 and W2. In short, I agree with CraneOp, that is, 1099 should be used for "subcontractors", people you have short term "job specific" bizz with. But for people that work with you every day week in and week out, they should be an employee. You start a business, yeah, it's a risk, you know that going in, but you choose to make take that risk and make a go of it. You end up doing well, bizz picks up. You still have that risk of keeping the work flowing, but you signed on for that, and I hope you keep being prosperous. As for the workers, some like being "independent", 1099, but others, they may be more concerned with stability, showing up every day, earning an agreed to wage, and go home, W2 employee. With being independent, I don't know how our current tax structure is going to work yet, but in the past, when I was 1099, when you pay me I better set aside at least 15% of that pay to cover income tax and social security. But also I have to declare being self employed, there's a tax for that too. On top of that in my state, since your self employed, you have the tangible personal property tax, and business tax, and the County business tax (govt loves taxes). But I have no bennies, insurance, workmans comp, and don't even go there with my personal liability insurance that I have to carry since I'm 1099 and therefore considered "self employed", that is, if I wish to be able to cover my arse if fit hit the shan. Again, this isn't one size fits all. But in the end, if you're a business, and you have workers who are "your guys", they should be your "employees". Just my humble opinion.
I believe it illegal to 1099 your employees. I was always told that by my accountants. If they are under your control they have to be paid as an employee. For a 1099 they have to have their own business.
There is so many different ways to do things . With all the technology it looks like the Government could hire a group of people to set down and figure out what is best and make sure things get done like it should be. The place i work at provides health insurance for some of there employees but not for me? I pay for my own I dont plan on staying there forever or I would ask why ? I think a lot of rules have ways for employers to get around doing stuff that would help employees but would cost.
If you describe them as a full time crew they are employees and not 1099 subcontractors. We provide health insurance for our guys that's the same plan my wife and I are on. Actually my wife and I were able to get a cheaper policy by creating a group and offering it to our guys. All we had to have is 1 employee opt in. 2 of the guys opted in. We are less than 10 person operation for reference. If they are 1099 subcontractors how are you contributing to their IRAs? We offer all our guys an IRA option with company match but then again they are real employees. How does your WC and GL carrier view all your 1099 subcontractors? Our carrier audits our payroll and subcontractors yearly. Also do you pay them overtime if they are hourly? A contractor here a few years back was doing the same as you are now and a group of employees sued for over time pay. The settlement shut the company's doors. Looks to me you are opening the door to a tremendous risk for your company and yourself.
Having your "guys" as 1099's is illegal, generally speaking. Lots of guys do it, but sooner or later if the IRS shows up there is going to be hell to pay. Nine Requirements Test for Independent Contractors, Worker Classification Test under Worker's Compensation Law Nine Requirements Test for Independent Contractors, Worker Classification Test under Worker's Compensation Law to assist in determining if a worker is an employee or independent contractor. dwd.wisconsin.gov This is Wisconsin, but the IRS sees it the same way.
And now it's all in writing on the whole internet. I did this 15+ years ago for a short period of time. I did require that the "sub contractor" have a GL policy and I was additionally insured by them. Got away from it. It's to easy even for a bad attorney to connect the dots and if someone gets hurt themselves or hurts someone else under you direction you will pay. In fact they will start asking questions in the ER or DR's office. Where, how, what were you doing when, for who, were you at work, who do you work for??? These aren't remote workers answering emails at home. They are on company property operating company equipment. A true sub will be insured, provide the tools, equipment, labor and sometimes materials to preform a scope of work usually but not always by contract. Once someone starts asking questions, it's not hard to determine what relationship exists between the one writing the checks and the one cashing them. Our WC auditor was one who flushed it out and we ended up paying if it wasn't right. Dose working in a MSHA environment bring a closer look at the employer/ employee/ contractor/ situation? I'm no expert but how are the training and qualifications handled? I would assume employers train or pay for training of employees. The 1099 folks must have to provide and prove they are compliant and up to date? I personally would move away from this model. Whatever you may save isn't worth what you will loose in this overly litigious society. A camera and voice recorder in every pocket, feelings that get hurt to easily, one bad actor that poisons the group, jealousy... It's hard enough for the ones doing it right to stay out of trouble. People that work for you no matter the arrangement are happy until they're not. Then the gloves can come off.
Yep, completely understand why you’re doing what you’re doing. BIL pretty much lost his plumbing business when one of his “sub contractors “ in my BIL’s plumbing van got hurt installing a boiler. WC claim just about put him out of business, then IRS got involved, never mind his insurance afterwards. This was in Mass, RI so right in your neck of the woods. My sister probably does your taxes. Granted, the reasons to do this wrong, are very lucrative and good luck to you. Have had my own problems with the IRS and hope they never darken my door again.
Stumbled onto this while getting some off our year end paperwork in order.
Not sure this thread is going a good way?
Im not the judge and jury, and put the peanut gallery aside (myself included) just reading post #1 and #10 I think a strong opinion can be formed on the situation. If this information (all posts) helps only one person then the thread and this platform is a success.
Over my fairly long career I have been lucky enough to have worked both sides of this situation. I explain it to potential clients like this. An employee is a farm animal you don’t have to feed or house. You do have to maintain their health and safety and direct everything thing they do. A contractor is a company that only does piece work in their own way on their own schedule with little to no direction. When I left my last employer I decided I would never become a farm animal again. The problem as a company using employees as contractors is that they, many times, don’t pay their with holding taxes and FICA and get in trouble with the feds. Now the feds want to see your books.
True statement.
I decided that in about 2018. Never again with the farm animal business . . .
I have been a 1099 "employee", owned my own business, and am an employee again. I will either own my own business, be a part owner of a business, or be a W2 employee. I'm not going the 1099 "employee" route again.
One thing it does do--it shows that hef is more about business owners with some equipment rather than it being {a platform as stated} for just straight mechanical repair and regular 8 to 5 mechanics. But for me and I've done both too, I'll take the farm animal route, and still be as insubordinate as possible by having a independent mind set, I've never been one of the guys. I still do part time work for the company as a farm animal W-2 type, but I do it my way or I don't do it as I've always done.
What I meant was, that I don’t think the OP thought this thread would go in this direction.
I don't see anything in the forum "objective" statement by Steve as saying this site is just about mechanical repair? I always thought the site is a pretty good mix of operators, do it yourself types, owners, employees, mechanics and farmers. There's electricians, plumbers, landscapers - welders, machinists, doctors, developers, there's even a guy that moves train cars. There's all kinds of Facebook groups that are pretty narrow in scope, probably the thing I enjoy most about reading here is the wide range of topics covered. In case you missed the site objective:
This thread is probably as good of a example of the diversity on the site as any. Looks to me like it's a even mix of employees, self employed, and employers.
I was a 1099 employee at one point (I didn't like it but I thought it was, what it was) and I have several contractors friends that 1099 their employees,(as defined by the IRS in post 10)I had no idea it was illegal so in that I am thankful for the thread and for my business practices moving forward should I chose to go the employee route. I will probably never be a employee again and if I did, now I know that I won't be taking a 1099 when told how, when on so on to complete a task. I would consult your tax professional to see if what you are doing is correct (there may be more information left out of the original post), I find myself not including all relative information to try to keep the post short instead of writing what I feel like is a book
I didn't miss anything, just stating a fact, which I guess got you stirred. Hardly even mix though. Most on here are running a mobile truck or own a excavating outfit, and some are hobbyist, but most have some kind of business.
The whole 1099 thing is a real grey area, my rule of thumb is if they have their own business and send me invoices I'm good with that. I've intentionally kept my business small and simple. I have no W2 employees and only a very few sub contractors that I use and pay via 1099. They each have their own business that the bill me through, their own trucks, tools, insurance, etc. I tell them what I need done and where it is, then they work it in their schedule. I do require everything to be done to my design and specifications however.
There is another side to the coin when it comes to the "how/what, the when and how to do it". We own our own business with W2 employees, licenses, etc however we sign contracts with GC's and owners that dictate how/what (stamped drawings), when (schedule) and how to do it (specs). Often times it also dictates where materials are to be purchased from. Actually if we don't do it how they tell us, when they tell us to do the job it could open us to legal trouble. Also training. On large jobs we have to go through a safety orientation training in order to get the cards/ID to be on the job. Just pointing out a distinction. You can be a one man band business and be subject to the conditions above and not be considered a W2 employee. Actually most of the boiler plate commercial contracts we sign has a provision stating that the contract is not an employment contract with the GC in the W2 since and we are responsible for all taxes, insurance, etc.
Truck Shop is a 1099 guy in W2 coveralls. Nothing wrong with a long leash.
I'm not programable, not a bootlicker, could care less about some ones authority, will let some one know to f off at the drop of a hat, including business owners. I'm not the typical employee, always on time, job comes first, would work from sunup to sundown, do the job to the best of my ability, don't need to be directed, will work 6 plus days a week because I like to work. I didn't show up to work complaining about work or working conditions, if conditions were poor I improved that myself. As a manager I led by example, and by what needed to be done with best outcome for all including business owner and other employees. My job was to maintain equipment to a level of safe operation and set a high bar as a standard that I considered safe for all even if I disliked who it was for. My job was not to waste money but spend it wisely, because it wasn't my money I was spending. I missed 1.5 Saturdays in 20 years at last employer. * In this day and age of threads like {Finding Qualified Help} and all whining about employees. Who ever I work for can damn well provided insurance, coveralls and what ever else and if not the box has wheels and I have shoes, adios, it's their loss.
Yes, much was not elaborated upon as to not have a novel. With that said, im well aware of the line that differentiates an employee (W2) from a contractor (1099) and am within the law thanks to my wife who is an attorney. I refer to them as my guys because we are pretty much family because of how long they've been with me in general. Simply put without a page of explanation a W2 employee has an overall cost and I just took that cost and offered it to the guys if they wanted to entertain becoming a 1099 worker and every one of them with the help of my wife if needed was able to source their own health insurance, disability insurance, and liability insurance while retaining more of their cost as a W2 employee to take home. They also lease/rent equipment from my holdings company so they can write that off along with other expenses they would incure as a W2 employee but not be able to deduct from taxable income. They know the scope of the job and make up their own schedule with some of them working 7 days a week at times. Anything that qualifies as over time for a W2 employee I pay out to match so they are not being taken advantage of as some may think. I also make up the SS and IRA contributions all the same. Every year my wife and I both run out all the numbers and being 1099 workers is allowing them to keep more of their money while maintaining the same or better benefits if they were a W2 employee. I also have a few less office expenses not running a payroll anymore. Hope this clears up a bit. No one is being cheated or anything illegal taking place. I also do not work property that I dont own through my realty company so there is no risk of a 1099 worker being blamed for damage to someone else's premises and being left out to dry. I have full liability insurance on my properties ready to take care of any of my guys who may be injured while hired to work on the property. No to mention they already have their own insurance on file with me. End of the day these guys are costing me the same rate as if I were paying out for W2 employees but retaining more of their pay to their benefit.
you carry work comp on the 1099's? should they get hurt on the job, or hurt somebody else, do they provide their own insurance? do you request to see that insurance certificate before you let them begin? if you have no work comp, they have no insurance....and let's just say your insurance isn't adequate, the doctors and hospitals that worked on him, or those he hurt will go after the project/property owner.