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A 1099, means that to the company paying the money treats the hairdressors as independent contractors instead of employees.
A number of factors go into worker classification for tax purposes, and pursuant to IRS Publication 15-A, they fall into three broad categories: behavioral control, financial control, and relationship of the parties.
It’s important to note that no single factor stands alone in making the worker classification determination; all factors together must be considered in order to make the proper classification.
1) Behavioral Control – As a small business owner, if you provide extensive instructions on how your work is to be carried out and training on required work methods and procedures, then the IRS will suggest that an employer/employee relationship exists. Detailed work instructions may include how and where the work will take place, what equipment to use, and where to purchase supplies and equipment. Similarly, if you want the job to be carried out in a certain way, and provide training to this effect, you’re likely hiring an employee, not an independent contractor.
2) Financial Control – Three factors come into play when determining whether you have financial control over an individual: significant investment, expenses, and opportunity for profit and loss.
3) Relationship – Factors that illustrate how the small business owner and worker perceive the relationship include presence of employee benefits and information included in a written contract. For instance, if you provide your worker with insurance, a pension, and paid time off, then the IRS may say this signifies an employer/employee relationship. If other facts or circumstances surrounding the relationship aren’t conclusive for worker classification purposes, a written contract often is. The written contract should clearly detail what you, as the business owner, intend to get out of the business.
All of these factor into the title, but I know the IRS is cracking down more and more as to the categorization of an employee versus a 1099 independent contractor.
Hi BizAttorney, So how do we get the IRS off of our back if we want to leave our employess 1099's
Don't give them insurance, paid time off or any type of retirement for starters.
You make them sign waivers saying they are certified hairdressors and don't train them (rely on them getting training from schools or other companies).
Don't reimburse the hairdressor for expenses and that will show the IRS that they are in business for themselves.
Hi BizAttorney, So how do we get the IRS off our back because we don't want employees but we do want the 1099's to come to our staff meetings and want to be able to have rules and dress codes for them as 1099's!
Thank you, XXXXX XXXXX sure to click the green rating button so that I can continue to help others.
You can have meetings, but it is more for scheduling and clean up etc., then for training, if that makes sense.
Dress codes are ok to have.
So can I have the 1099's sign a contract when we hire them that says they need to come to staff meeting and abide by our dress code and with this contract will the IRS leave us alone?
I can't guarantee the IRS will leave you alone, but the more evidence you have of independent contractor agreements, etc, the easier the argument that the hairdressers are 1099 contractors and not employees.
And by evidence do you mean a contract or the fact that they pay for things!
So BizAttorney by evidence do you mean making them sign a contract and I am covered because they have signed!
Yes, some type of document stating they pay for their own supplies, combs, etc.
Then with the contract and them paying for thier own supplies then that is proof that they are 1099's!
That will definitely help, the IRS looks at all of the factors as a whole, so try to get as many of them as you can in order to help your cause.
True 1099's pay for everything correct but still need to abide by the house rules! It is okay to have house rules right?
Yes, that is fine to have.
So to sum it up. It is okay to have 1099's sign a contract with the companies do's and don'ts like they will attend staff meetings and abide by our dress codes but as 1099's I should make them pay for their training and their supplies and the rent for their booth and other things! Is this correct?
Yes that is correct.
Thank you so much BizAttorney you have been so helpful!
You are very welcome!
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was very knowledgeable and answered my questions promptly. I so appreciated his answers!