1099 or w-2

[TAX4US]

Lets see what someone else would do. TP self employed decides to open new location. Needs lots of construction work done. Hires a worker who presently laid off to do some of the work. TP provides all the materials per spec sheet. Worker does the work over several months while also doing other jobs for other people and old employer. He and TP decide he will get $15.00 per hour. After 2 weeks worker tells TP he has worked 30 hrs. This goes on for about 3 months. TP wrote checks for the hrs @15. whatever the worker told him.

Is worker w-2 or 1099? I ask because worker is attempting to draw unemployment using hrs he work for TP. By the way TP and worker are in Virginia and work is in Virginia.

What do you think? Thanks to all

[JohnH]

This is the classic case of why classifying casual labor as an independent contractor is problematic. Even if it were a gray area (which I don't think it is), the employer should always err on the side of treating the worker as an employee. Everybody's happy cashing the checks with no withholding when the money is changing hands, but then the worker decides to apply for unemployment and all of a sudden they have a memory loss - suddenly they're absolutely SHOCKED at the situation - "I didn't know he wasn't taking taxes out on me!"

[Kram BergGold]

My opinion

Assuming your client is not in the construction business, I would say 1099 and I would fight the unemployment people tooth and nail on this.

[smithtax]

I vote employee

I would submit it is an employer-employee situation. Worker satisfies most if not all of the 'common law rules' pertaining to behavioral and financial control.

See Reg §31.3121(d)-1(c), Reg §31.3306(i)-1(b), Reg §31.3401(c)-1(b), & Rev Rul 87-41

[David1980]

I recall seeing a statistic that 90+ % of these the IRS looks at where the status is in dispute they find as employees.

[S T]

Calif - Worker's Comp Audit usually "catch these" In Calif - the presumption is that you are an employee in the construction field, if you do not have a contractor's license (primary criteria), and also a business license (secondary criteria) - THEN you are an employee!

Worker's Comp in Calif will relay the information to the Calif EDD (State Payroll Agency) if they find, and subsequently add'l payroll taxes for UI - SDI etc.

Not sure about other State Payroll Agencies??

Sandy

[Burke]

Unfortunately, he elected to pay the worker by the hour. Bad move. He should have contracted with him for a fixed amount for the job, and let the worker set his own hours. Hard to classify as independent contractor when this has been done.