Employee vs Contractor: How You can be sure your 1099s are correctly classified.
How you hire a worker determines whether they are a W-2 wage earner or a 1099 contractor.
Among the criteria used to determine employee vs contractor status are: how taxes are paid, when you pay your worker and how you pay them. These are not the only factors that determine employee or contractor status but they are all crucial factors in determining if you have correctly classified your 1099 contractors.
Since AB-5 and the new Gig work bill became law on January 1st, 2020 many employers are concerned about their 1099 contractors' status. This graphic outlines a few of the differences in the WAY a worker is hired, the WAY they are paid, the METHOD of taxation and the TIMING of payments.
Need a deeper dive? Check out our 27 page ebook on AB-5, complete with case studies of both the black and white and the grey areas of 1099 worker classification vs employee hiring.
In addition to the elements above, hirers must look at the autonomy of their workers. If you are not 100% certain of your worker's independent status we recommend a tool to verify those workers' status. CLEAR1099.com Is a newer web based service that will verify EIN, Professional license validity, web presence and other factors EDD uses to determine if a worker is correctly classified as a 1099 contractor or should be reclassified, often at great expense, as a W-2.
FOr more Information, please reach out to the team at Milikowsky Tax Law. We are experts in EDD and the new AB-5 classifications.