Can I legally pay subcontractors hourly in IN and use 1099's? Another words if they are paid hourly are they legally defined as employees as opposed to sub-contractors?

apostolakisclean · ‎October 19, 2018

I have been paying my subcontractors by the job for two years and using 1099's. I would like to begin paying them an hourly rate and still continue to use 1099's as opposed to starting to with hold taxes, pay workman's comp. etc. My subcontractor's are onboard with my decision. I just need to be sure of the legal aspects of doing so, as in what defines an employee or a subcontractor in terms of rate/unit etc. of pay. Thanks.

qbteachmt · ‎October 19, 2018

"as in what defines an employee or a subcontractor in terms of rate/unit etc. of pay."

Paying Hourly is not really part of this. I charge by the hour, for instance.

Employee or Independent Contractor includes some tests to examine the relationship. Examples are Fed and State, like this:

Do they work for other general contractors, or just you?

Do they have their own tools and equipment?

These are part of the "are they Independent" and running their own Business, test.

If they do something wrong, or damage the property, or break equipment, who is liable for fixing it? This is part of the "At Risk" test."

Do they come and go by telling you, or do you tell them? This is part of the Supervision test.

As for Worker Comp, in some States, you still are liable for WC when the independent contractor is on your job site, anyway. WC is not a test. It is a fact of doing business.

Worker Misclassification is a Huge concern; your own Job Service or Work Force Center or Dept of Labor can help you. You might have had it wrong all along.

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qbteachmt · ‎October 19, 2018

"as in what defines an employee or a subcontractor in terms of rate/unit etc. of pay."

Paying Hourly is not really part of this. I charge by the hour, for instance.

Employee or Independent Contractor includes some tests to examine the relationship. Examples are Fed and State, like this:

Do they work for other general contractors, or just you?

Do they have their own tools and equipment?

These are part of the "are they Independent" and running their own Business, test.

If they do something wrong, or damage the property, or break equipment, who is liable for fixing it? This is part of the "At Risk" test."

Do they come and go by telling you, or do you tell them? This is part of the Supervision test.

As for Worker Comp, in some States, you still are liable for WC when the independent contractor is on your job site, anyway. WC is not a test. It is a fact of doing business.

Worker Misclassification is a Huge concern; your own Job Service or Work Force Center or Dept of Labor can help you. You might have had it wrong all along.

qbteachmt · ‎October 19, 2018

"Reagan Jones with Jones Janitorial Inc.is paying me as a subcontractor 12.00 an hour to clean a bank monday,Wednesday, and Friday making only 360.00 a month."

None of this applies to the test for "Worker Misclassification" in the US.

"I am providing my own supplies used to do complete the project."

It isn't just Supplies. It includes Equipment. It includes Risk; if you Break a Window or damage a desk, who will pay for the damage? Who has the General Liability insurance for this Contract?

"Is this ok with the government? I said ok cus it probably is legal if Reagan said it is ok to pay me an hourly rate."

Hourly Rate is not the issue.

It's like this:

If the Janitorial Company has the contract with the bank, and they subcontract to you, you need to Contract between the janitorial service and you. You don't use the Floor Polisher that Jones Janitorial brings over once a month; you need to buy or rent one Yourself. You don't get the equipment repair person from Jones to come fix anything, unless you then Pay Them for this. When you are running your own Business, you are At Risk, and you incur the costs for the benefit of the income.

"I caculated taxes and an I am not even making minuim wage with the assigned work."

That also doesn't apply, if you really are in business for yourself.

You are posting on a QuickBooks user forum on the internet. You seem to have an Employment Law question. Call your State's Department of Labor for more help.

"You should receive a 1099 by 1/31 of every year since your remuneration exceeds 600 annually"

The Regulation reads as "At Least $600." It is not Exceeds.

erinlee1176 · ‎October 19, 2018

Reagan Jones with Jones Janitorial Inc.is paying me as a subcontractor 12.00 an hour to clean a bank monday,Wednesday, and Friday making only 360.00 a month. I am providing my own supplies used to do complete the project. Is this ok with the government? I said ok cus it probably is legal if Reagan said it is ok to pay me an hourly rate. I caculated taxes and an I am not even making minuim wage with the assigned work.

john-pero · ‎October 19, 2018

Hourly as a subcontractor is fine. The $12 exceeds the federal minimum wage. Providing your own supplies is part of the contract. As long as this is as a contractor and you submitted a correct W9 and are not subject to backup withholding then there should not be any taxes deducted from your pay for services. You should receive a 1099 by 1/31 of every year since your remuneration exceeds 600 annually

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Can I legally pay subcontractors hourly in IN and use 1099's? Another words if they are paid hourly are they legally defined as employees as opposed to sub-contractors?