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    7 Replies Latest reply on Oct 18, 2007 8:33 PM by LT Lawn Care

    Payroll taxes

    LT Lawn Care Wayfarer
      I have an employee who for the past year I've been paying as a contractor. He works for me on special projects (large land clearings, etc.) but uses my company's equipment. Lately I have been using him full time on basic lawn maintainance projects because he is very hard working.

      I am just wondering at this point if I need to pay him as a regular employee which he is not happy about or can I still keep paying him as a 1099?
        • Re: Payroll taxes
          BDS INC Adventurer
          LT,

          Your contractor has likely become an employee and you should pay him as a W2 employee. If you set his hours and he uses your equipment for his job exclusively, then he is your employee.

          I'd talk to your accountant about it but I bet he'll tell you, you need to start paying payroll taxes ASAP.
          • Re: Payroll taxes
            DomainDiva Ranger
            I am on a long term contract now. (its how I eat and feed the start up).

            When I started I gave the company my consulting contract that had a tax clause stating that I was responsible for my taxes and that no employer-employer relationship exists such as for the payment of taxes and benefits. I also have a performance clause in the contract that says I will use all of my skills and rescources available to perform according to the expectations of the client. Use of your equipment is not enough to prvove that he is an employee, there are also other issues such as days off, vacation, sick leave etc; and whether or not he is free to leave for the day whenever he wants to.

            Talk to an employment specialist. This could really go either way.
              • Re: Payroll taxes
                BDS INC Adventurer
                Domain Diva I would agree that he should consult his accountant or a payroll specialist but I guarantee you that if he is setting the jobs and hours this guy has to work and the guy isn't bringing his own equipment to the table his state employment agency is going to consider him an employee. Any indepenent contractor particularly in the type of business he is in will likely have their own equipment and not be restricted to set hours, etc.
                  • Re: Payroll taxes
                    DomainDiva Ranger
                    I don't agree about the equipment issue. A friend contracted at TXU (before the sale) in their revenue accounting department and used the TXU system(s) provided to her. The issue is one that needs a professsional opinion for his business type.
                      • Re: Payroll taxes
                        LT Lawn Care Wayfarer
                        DomainDiva & BDS thanks for your help. I contacted the state employment agency and based on the description I gave them they will indeed classify him as an employee. BDS it had less to do with the equipment and more to do with what you said about setting hours for him. Since I have him work a set 8 hours they are forcing me to add him to payroll.
                  • Re: Payroll taxes
                    LUCKIEST Guide
                    It sounds like he was a contractor. Now he is an employee.
                    When the state comes along and audits your payroll he will be
                    classified as an employee and you will be liable for back taxes.
                    Talk to your accountant. A good time to change might be Jan 1 st of next year.
                    Good luck, LUCKIEST