@Samar Hadhoud
When our businesses went through a payroll audit, I asked this very question to our state auditor. Her response was that you can only treat a W-2 employee as a 1099 contractor if they are providing a service to your business that requires specialized training and/or equipment. For example, treating an employee as a contractor because they provide cleaning services probably is not acceptable because any employee could provide that service.
I have had a couple of businesses where we had employees who also worked for the business as 1099 contractors. In one case, it was an employee that provided graphic design services and in the other, it was an employee that provided photography services. In both cases, the employees had specialized training and equipment for it so they could be treated as 1099 contractors (and they had separate businesses for these services).
