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socrateaser, Lawyer
Category: Employment Law
Satisfied Customers: 36606
Experience:  Retired (mostly)
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Independent Contractors and unemployment taxes

Resolved Question:

I run a staffing agency in NYC specifically for waiters. This means when caterers dont have enough of their own staff they give me a call and I provide the deisred amount of staff needed at the party. I have my staff fill out W-9 and I provide them with 1099. My question is im paying over 7K in unemployment taxes every quarter which is mounting to close to 30K yearly, am I paying this for naught? Do I have an obligation to pay for unemployment, or are my workers considered independent contractors since none of them are required to take on a specific job, they have the right to turn down any job that is offered to them.

Thank you
Submitted: 5 years ago.
Category: Employment Law
Expert:  socrateaser replied 5 years ago.

Unemployment benefits are only available to W-2 employees. Workers who are paid gross reported on a 1099 are not employees, so they're not entitled to UI benefits.


However, based on the job description of the workers, they really are employees and should be paid on a W-2. Because, if the IRS finds out what you're doing, and determines that your workers are employees rather than independent contractors, you could get crushed with fines for failing to collect and remit Social Security (up to $25,000 per employee per tax year).


Similar problems could happen with the Workers Compensation Board.


What I'm not understanding in all of this is how it came to pass that you started paying UI contributions for nonemployees.


Not that it matters, but something is definitely unusual about your relationship with the State of NY and your workers.


Hope this helps.


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socrateaser, Lawyer
Category: Employment Law
Satisfied Customers: 36606
Experience: Retired (mostly)
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