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Paying Independent Contractors and Issuing the Dreaded 1099

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Hi! I’m Donna Bordeaux with CampgroundAccounting.com. I wanted to talk to you today about 1099’s; everybody’s favorite topic. As we get to the middle of the year, people stop and forget about that lovely time of the year when they process their 1099’s, but now is the time to think about it. There should always be a process in place so that you don’t have to worry about this in January when the forms are due.

Who is considered a 1099 Vendor or an independent contractor? The first thing that we look at is control. Control is the biggest factor that determines if someone is a 1099 Vendor versus an employee. In a 1099 situation, that person should not be under your control. You’re not telling them to work from nine to five and these are the duties I want you to accomplish, or here are the tools to do your job. You should be providing a very minimal impact on how it is they complete the task. Think of this in terms of a landscaper who comes out to your site. You might tell them you want a new raised flower bed, clean up some areas, or trim some trees. You don’t care what equipment he uses, or how long it takes. You really just care about the results they will achieve and that’s what you’re paying for. You don’t care if he brings one guy, five guys, ten guys, or even what type of machinery he uses. You just want the job done. That is the true definition of what a 1099 Vendor looks like.

There is a lot of controversy about work campers. I’m here to tell you work campers are not 1099 folks. They are truly employees, so the faster you get that under control and move out of that situation to minimize risk, the better off you are. And if you don’t believe me, talk to your insurance agent. There’s a lot of things you have to worry about if you’re treating work campers as 1099’s so I’d be happy to help you move out of that situation and get those folks on payroll so they can be paid the correct way.

Going back to 1099’s; I gave you some guidelines as to who is a 1099 contractor. How do you make that time of the year when you need to issue those 1099 forms a little bit easier? First off, I’m here to tell you “not a dime without the W-9”. The W-9 is the form that you’ll use to request that your independent contractors fill out and provide you with the information you’ll need to complete their 1099. I’d always suggest getting an email address because that will make things a lot easier to deliver and save you postage costs as well.  The W-9 will request they provide the legal name of who you’re paying and that name should match what’s on the check. Always write the check out to the same name that’s written on the W-9 to protect yourself. The form will also provide you their W-9 address, Federal ID or social security number.  Get all that information before you issue any payments as it will resolve a lot of problems.

I also highly suggest that you collect Certificates of Insurance from each of your 1099’s. You’ll find that when you go through a worker’s comp audit, you have to pay the worker’s comp if they don’t have their own. Collect the Certificate of Insurance and save yourself some problems when the time rolls around for a worker’s comp audit.

Next, how should you issue the payments? I will tell you there’s one secret way to never have to issue a 1099. The secret is to pay via a form of credit card or another form that we’ll go through merchant processing. Whether it’s through PayPal or paying them by a credit card, they will receive a 1099-K from their merchant provider which is already linked up to their federal ID number. That is how the IRS tracks to make sure that they report their income appropriately.

If you pay only via PayPal or credit card, you’re off the hook! You do not need to issue the 1099. Please don’t pay by cash and always at least use a check. If you’re paying by check, you’re going to have to issue that 1099 at the end of the year. You don’t want to be tracking people down, so make sure you got the W-9 on file before you write the check. Vendors are very motivated to give you that form if the check is coming because they sign off on it.  Make sure that you issue those 1099s appropriately by January 31st. We’re here to help you issue 1099’s or help you determine if someone should be a 1099 versus an employee.

Donna Bordeaux, CPA with Campground Accounting

What happens when you send two CPAs out into the relaxing outdoors to camp? You get CampgroundAccounting.com.  Donna and Chad have over 50 years of combined experience as entrepreneurial CPAs.  They’ve owned businesses and helped business owners exceed their wildest dreams. They camp and travel across the country every chance they get, so it’s just a natural fit that they focus their CPA skills on helping campground owners throughout the USA grow their businesses and minimize the impact of taxes.  They understand the key performance indicators and specialized issues that face RV park owners every day.