In our last blog post, we introduced the basics of working with a 1099 independent contractor. In the final part of this two part blog series, we uncover the various risks associated with hiring 1099 contractors. While the concept of hiring 1099 independent contractors may seem initially appealing, it is vital to understand that it does not come without risks. The following are a handful of possible dangers that hiring managers and business owners should keep in mind when working with these contractors.
- Misclassification: It is not unheard of for a 1099 independent contractor (that you have hired legally) to claim that you have misclassified them as a 1099 employee when they were actually a regular employee. Misclassification of contractors is a serious claim and could result in severe legal action or an IRS investigation.
- Law Suits: As mentioned in the previous misclassification risk, a 1099 independent contractor could take legal action that could result in a hefty and costly law suit. This legal action typically regards various benefits, disability, insurance and workers compensation claims that wouldn’t otherwise be associated with a 1099 independent contractor.
- IRS Audits: Audits will likely occur regularly. These audits will be carried out by government organizations varying from the IRS to the Department of Labor and many in between.
- Additional Tax Payments: The tax payments associated with misclassifying an employee (intended or not) can really break the bank. If the IRS determines that a business owner is responsible for a misclassification, they may be held monetarily responsible for any and all paid and unpaid or withheld taxes with interest. It is also essential to understand that business owners can be held accountable for any unpaid taxes of a 1099 employee (even if they have not been misclassified).
- Hefty Penalties & Fees: Misclassifying 1099 contractors can result in the payment of back wages or increasingly large sums of uncollected government fees.
Working with 1099 contractors is obviously a risky business, but do not fret; staffing agencies like JPS can help you avoid the multitude of misfortunes that could accompany this kind of employee. If you are seeking out quality temporary staffing solutions, we encourage you to contact the team at Josephine’s Professional Staffing today.
About Josephine’s Professional Staffing
Founded in 1988, Josephine’s Professional Staffing has nearly 25 years of business success and is continuously committed to providing superior quality staffing solutions to companies in the Bay Area. We proactively and consistently search for avenues to provide staffing solutions in the field of administrative, accounting, healthcare, light industrial, technical and professional services while taking pride in each of our employees. Josephine’s Professional Staffing is a Certified Small Business Enterprise (SBE), Underutilized Disadvantaged Business Enterprise (UDBE), and Minority Woman-Owned Business Enterprise (MWOBE). We can be reached at firstname.lastname@example.org or 408.943.0111 and are located at 2158 Ringwood Avenue, San Jose, CA 95131.
Photo Credit: Victor 1558