When it comes to properly filing your taxes with the IRS, using a subcontractor could be a Catch 22. Recently, the U.S. Department of Labor administrator of the Wage and Hour Division issued a memorandum that some say puts more emphasis on the sub’s economic independence, making it so the more he/she relies on you for his living, the harder it will be for you to prove he’s independent. At the same time, however, the IRS is increasing audits of contractors with 1099 classifications.
The sub-vs.-employee question is a judgement call for certain. But four years ago, attorney and accounting professor Barry Leibowicz wrote an essay that clearly established the characteristics of an employee and an independent contractor, as outlined in a recent column by Judith Miller in a recent column for REMODELING.
So what does one do? First, identify if you have properly classified the worker based on the criteria set by Leibowicz. Then follow Miller's six tips to ensure you stay on the right side of the law. Read More