We are often asked “can I just give them a 1099” or “my employee says he just wants me to give him a 1099”.  As easy as it would make life to just give everybody a 1099, the laws don’t allow it.  You need to be very careful when classifying somebody as an Independent contractor.  The IRS gives guidance as to who is an independent contractor, then the state gives even further guidance so you need to be careful to meet both requirements.

I will now quickly outline a few of the IRS rules.  The first category is Behavioral Control. Do you direct or control how the worker does the work, if so then they are an employee.  If you control the following, this suggests they are an employee: how, when, or where to do the work; what tools or equipment to use; what assistants to hire to help with the work; where to purchase supplies and services.  If you provide training this suggests that they are an employee

The second category is Financial Control.  The following suggests they may be an independent contractor: If the individual has a significant investment in the work; if they are not reimbursed for expenses; or if they have the opportunity for a profit or loss on the job.

The third category is the relationship of the parties.  If you receive benefits, this is an indication that you may be an employee.  If you do not receive benefits, however, you could still be considered an employee.

For a full list to help you determine please see the IRS Publication 15-A the link is attached

The state of Utah rules follow the IRS rules plus some of their own.   To be classified as an independent contractor, the individual must be independently established in the trade, occupation, profession or business.   The individual must have their own place of business, have their own tools, and perform the same work for other clients. They must have a business license, and advertise through various sources.  For a full list of the state requirements please see the Utah Department of Workforce Services Employer Handbook the link is attached.

Travis Ward
Payroll Experts, Inc.


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