I get many clients asking if they can pay a person as a 1099 contractor? You can pay a person as a 1099 contractor if your work relationship to them is with in the proper description. GET IT WRONG and your company could be looking at some hefty fines and penalties. Your company would have to pay:
1) All the overhead taxes (Social Security, Medicare, FUTA, SUTA, and maybe more depending on your state)
2) Late penalties on the unpaid amount
3) Daily interest on the unpaid amount
4) Penalties for not filing the correct forms
One client came to us to do their payroll. They had been paying all of their employees as 1099 contractors for several years. They got audited by the IRS, which opened up their state audit. They ended up having to pay over $15,000.00 in taxes, fines, and penalties.
Be sure you know when the person working for you can be paid as a 1099 contractor and when a person should be paid as an employee. You can call me at 765-288-7243, or contact me through our website www.TPSpayroll.com for more information on this subject.
~James~
