New Laws for 1099 Independent Contractors

By on October 4, 2018

By Tim Kolacz

In the great land of opportunity, we always want more. We want to be better than yesterday. We want to go further, faster, higher (and an Olympian, I guess). Are we the best athlete, professor, insurance broker, coach of your kid’s AYSO soccer team? As business owners, or as an Independent Contractor doing work for multiple companies, we want to know how to classify ourselves in the eyes of the law.  Are we an employee or are we as independent as we think we are?

With the new regulations here in California, the definition of what is an Independent Contractor and what is an Employee is supposed to be cleared up. Supposed to be.

Let’s go over what we do know:

You now are considered an employee if you are in the same business as the company that hired you. For example, if you are a plumber, and Jack’s House of Plumbers hires you to go clear a drain and to add a faucet, you are now an employee of Jack’s. This is because you do the same thing Jack’s does. This is, more or less, the argument with Uber and the people who drive for Uber. Is Uber a Technology company or are they a rideshare company? Conversely, if you are an IT professional and Jack’s hires you to do IT work, you are not an employee because you do not do the same thing as Jack’s. So far, so good? Not so fast my friend.

We know that if you are a 1099 contractor, but the company you are doing work for dictates the hours you are to work, tells you when you can take your breaks and other wise has you follow the rules of a normal employee, you are considered and employee of that company. For example, you are an IT professional and Jack’s hires you to build their new website. But Jack’s owner, Rebecca, wants you there every day at 8am, makes you go to lunch every day at 12:15 and makes you stay until 5pm, then you are now classified as an employee. Bummer, but at least clear.

So to make sure that you stay independent, you need to make sure that attention is paid to how the client wants you to work. Project based is great; no set hours, meetings scheduled on your time frame. Now for the business that hired the Independent Contractor, you still need to set deadlines and follow up accordingly. Just because there are deadlines, this only dictates progress and job completion. It does not change their status as an Independent Contractor.

And why did this law go into effect anyway? Well, for one thing is that it’s about money. The IRS always assumes you are an employee and you will need to show that you are not. When you are an employee, your tax money comes in to the IRS as the company pays your paycheck. Taxes are pulled right then. As an Independent Contractor, the taxes are paid far later down the road. The farther down the road you pay your taxes, the fewer dollars the government has to pay current bills.

Additionally it’s about the safety of the people doing work for the company. If they are considered employees, you are likely to train them better, than they are more likely to follow the safety programs you have put into place for the company as a whole. So if they are safer, they get into fewer work related accidents. This is good, as we all like to pay less for business related items so we can pay more for a new set of cleats.

 

Tim Kolacz

Tim Kolacz provides the Right Solution for his prospects and clients. He can be reached at 951-779-8730 or tim.kolacz@hubinternational.com. Plus and this is the coolest part, he likes his job and has fun every day.