Hiring a contractor

[erchess]

If a firm hires a worker who is correctly classified as a contractor, is Form I-9 required? Is there another form that should be used instead? What kind of trouble is a firm in if at reporting time it knows that it does not have a proper Social Security Number on a contractor?

[S T]

Not sure on I-9 form

I have all of my business clients, obtain an IRS - W-9 form (would provide the TIN# or SSN # and name, address, etc.) request license #, and a copy of the contractor's Work comp Insurance. (for Consturction ) or obtain separate proof if some other Professional License.
Calif for sure does not recognize an Independent Contractor unless they are registered under State contractor's license (Construction Contractor) , or a Professional License - and will re-classify as an employee.

A 1099 Misc form usually can not be completed-filed with IRS without an TIN# or SSN#, or will later be "bounced back" if IRS can not perform an ID match.

Sandy

[erchess]

This is in NC

where an awfully large number of workers get told they are contractors if they want the job. Nearly anyone who comes to your home or place of business representing a large multistate business is being treated by the company as a contractor. Likewise at least half of the people who work as construction and factory laborers are being treated as contractors. It's a big scandal in my opinion. I know of no enforcement.

[oceanlovin'ea]

If I (as a firm or business) was going to hire someone to do work for my business, BEFORE he started any work he would have to give me his social security number or EIN if he were coming to me as a business. I would need that to know if I was writing the check to pay him to him personally or to his business.

If he was going to do work that might require him to do something of a nature that would require worker's comp, I would ask for that proof also. You need this information before they start to work because if they fall off the ladder while they are working at your place, you want to know you won't be sued.

After the fact, it is always hard to get this information.

Linda, EA

[FEDUKE404]

NC just sees things differently

where an awfully large number of workers get told they are contractors if they want the job. Nearly anyone who comes to your home or place of business representing a large multistate business is being treated by the company as a contractor. Likewise at least half of the people who work as construction and factory laborers are being treated as contractors. It's a big scandal in my opinion. I know of no enforcement.

Reminds me a lot of the not-too-distant past when there were many "independent contractors" regularly working a 40-hour/week stint in the RT Park.

From what I heard through the grapevine, a bit of selective enforcement eventually came into play for those folks.

Politics can indeed be strange. Even the NC governess today vetoed the budget proposed by the state legislators.

FE

[JG EA]

Just to clarify, an I-9 is just for employees. Can you imagine if everyone working as a sub-contractor had to give their SS#, date of birth, maiden name, etc. to every business the did work for?

[David1980]

If a firm hires a worker who is correctly classified as a contractor, is Form I-9 required? Is there another form that should be used instead? What kind of trouble is a firm in if at reporting time it knows that it does not have a proper Social Security Number on a contractor?

To request the TIN, they should use W-9. It would be a bad idea to pay a contractor without knowing the SSN.

[taxea]

If a firm hires a worker who is correctly classified as a contractor, is Form I-9 required? Is there another form that should be used instead? What kind of trouble is a firm in if at reporting time it knows that it does not have a proper Social Security Number on a contractor?

Erchess, I'm a bit confused. If you mean by "worker/correctly classified as a contractor", an IC, then they would have to obtain a W-9. I would have to look up the code on W-9/IC to determine whether there is any penalty for not obtaining the proper information to complete a 1099-misc at the end of the year if required.

The way the IRS is tightening up with the IC vs. emp rule...I am currently leary of deducting the expense for IC, paid $600. or more during year, without a 1099-misc copy from the firm/client that has SSN/EIN info on it.

I further see this becoming a due diligence issue to the point were we would have to see the documentation between the IC and the firm to verify that the IC was not paid $600 over the year.

[Burke]

JG EA is correct. I-9 is just for employees. The "I" stands for "Immigration" and this form which has been around a couple of decades or more, was intended to document citizenship, not SSN's. Hence the requirement for birth certs, passports, etc as primary sources. Two sources of ID required for other than primary evidence. Employer must review the original source document(s)and sign I-9 form, but he keeps it in his files in case INS shows up and wants to see them. I always photocopied the presented ID documents and attached them to the original I-9 for my records. Form W-9 is used for SSN's, and for independent contractors, yes -- do need that one, but for tax reporting purposes not citizenship.

[erchess]

TY All

The client in question will be keeping meticulous records of what he pays to whom and when and why. I didn't even have to tell him to have a separate checking account for the business. He's without a doubt the youngest and most organized client I have. He knows he has to get me to do a 1099M for anyone whom he pays $600 or more and now he knows that he needs to see their SS Card before giving them their first assignment. He by the way is running an advertising company where he will spend his time finding clients, determining their needs, and doing rough drafts of their campaigns. Then he will staff out the various parts and get the work back, present it to the client, accept payment, and pay the contractors. Everyone he has does what they do for him either as a full time employee or as a contractor already serving many customers. They have each agreed to work for my client for half of what they usually charge in consideration of the fact that he will take some of the necessary work off of them.

[taxea]

The client in question will be keeping meticulous records of what he pays to whom and when and why. I didn't even have to tell him to have a separate checking account for the business. He's without a doubt the youngest and most organized client I have. He knows he has to get me to do a 1099M for anyone whom he pays $600 or more and now he knows that he needs to see their SS Card before giving them their first assignment. He by the way is running an advertising company where he will spend his time finding clients, determining their needs, and doing rough drafts of their campaigns. Then he will staff out the various parts and get the work back, present it to the client, accept payment, and pay the contractors. Everyone he has does what they do for him either as a full time employee or as a contractor already serving many customers. They have each agreed to work for my client for half of what they usually charge in consideration of the fact that he will take some of the necessary work off of them.

He needs to get a W-9 from each IC before they do any work for him.

[erchess]

Nice Catch Taxea

I knew that but I wrote imprecisely. Even my client knows to do the W-9. I have also advised him to see the actual SS Card and Government Issued Photo ID and scan both sides of each into his computer and copy to me for backup.

[taxea]

I knew that but I wrote imprecisely. Even my client knows to do the W-9. I have also advised him to see the actual SS Card and Government Issued Photo ID and scan both sides of each into his computer and copy to me for backup.

The best way to CYA is with proper documentation. I do the same.

[Gary2]

I knew that but I wrote imprecisely. Even my client knows to do the W-9. I have also advised him to see the actual SS Card and Government Issued Photo ID and scan both sides of each into his computer and copy to me for backup.

I'd be cautious about scanning and keeping a copy of the social security card, because of evolving regulations concerning privacy. He may well be exempt due to small size, but who needs the trouble of researching current regulations, and, if necessary, writing a privacy policy, making sure his disk drive is encrypted, etc.

For the I-9, the employer is required to see the proof, but the instructions explicitly say that making a photocopy is optional. For the W-9, the person requesting it isn't even required to see the proof. I could understand asking to see it, as long as you ask all contractors. I could understand keeping copies if there were a significant risk of undocumented workers, but that doesn't seem to be the case here. So why make things more complicated than necessary?

[erchess]

Gary

I didn't know privacy policies applied to people who work for the firm. I thought they only applied to customers / clients / patients of firms and practitioners in the financial, accounting, tax, and medical industries. I know those are the only firms that give me privacy policies.

In this area there are a great many illegal aliens and quite aside from any desire to avoid punishment myself I believe in making sure I and my clients do not hire them.