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Vent: a client kept paying freelancers as 1099 when they were clearly staff, and the IRS letter finally made me switch sides
I used to tell small agency owners that calling everyone a contractor was fine as long as you had a signed agreement. Last August a client in Portland got a letter from the IRS about three people who worked 40 hours a week at his shop with set schedules and company laptops, and the bill came to about $14,000 in back payroll tax. What convinced me was the control test itself: if you set their hours, give them your gear, and they can't take other work, the contract label means nothing. I had been reading the agreement instead of looking at how the job actually ran. Now I ask about schedules and equipment on the first call. Anyone else get burned by paperwork that didn't match the real setup?
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ellis.mia19d ago
Wait, the IRS actually sent a letter over just three people and hit him with 14 grand? That part blows my mind because I always figured small stuff like that flew under the radar. I get what nathanj56 means about no single factor deciding it, but 40 hours a week with set schedules and company laptops is about as clear as it gets. That's basically a full-time employee with a fake label slapped on. The piece that got you, reading the agreement instead of watching how the job actually ran, that's the trap so many people fall into. Paperwork is just paper if the day to day looks nothing like it.
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nathanj5619d ago
The control test sounds clean on paper but the IRS weighs a bunch of factors and none of them decide it alone. Plenty of real contractors work set hours on client gear and still pass, so I would not tell people the label never matters.
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