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DanielleCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 784
Experience:  Years of Experience in Business & Personal Taxes
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We have an employee who will be terminating his "Full Time

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We have an employee who will be terminating his "Full Time Regular" employee status on 8/31/13 and becoming a consultant effective 9/1/13. He will work for his as a consultant in our Oklahoma Territory. (No benefits) We would like to continue to pay him the agreed upon consultant pay through payroll and not 1099 him. (Oklahoma taxes taken out) Since typically we have paid our consultants through our Accounting Department and 1099 them, I just wanted to make sure we are allowed to W-2 this type of position and take taxes out?

DanielleCPA :

Welcome and thanks for your question!

DanielleCPA :

It may still be appropriate to pay this consultant with a W-2, but it may also be more appropriate to pay him with a 1099. It depends on the specific facts and circumstances of your relationship and agreement with the consultant. It is very important that you classify him correctly because it is a hot button issue with the IRS.

DanielleCPA :

The IRS looks to three areas in determining proper worker classification - Behavioral, Financial, and Type of Relationship. A good quick overview can be found on the IRS' website.

DanielleCPA :

There is a list of 20 questions that the IRS uses to help identify employee vs independent contractor.

DanielleCPA :

Generally, the more freedom and control the individual is, the more likely it is they should be treated as an independent contractor and receive a 1099. Generally, the more control you have over the individual, the more likely it is they should be treated as an employee.

DanielleCPA :

Did you have questions on that information?


No, you answered it perfectly. Thank you!

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