Employee wants to switch from a w-4 to a 1099 employee...

We run a trucking company and our driver wants to switch from a w4 employee who we take taxes out on to a 1099 emplyee who handles his own taxes. How do I change this? Will it cause a red flag at IRS? Thanks for the help!

Comments

  • 4 Comments sorted by Votes Date Added
  • If the driver is an employee you must withhold income taxes, withhold (and pay) Social Security and
    Medicare taxes, and pay unemployment tax on wages. This means a W-4 is needed. In the case of payments to an independent contractor, you don't have to withhold or pay any taxes and a 1099 is used. If this driver is an employee of your company and you change him to a 1099 then IRS and/or state department of revenue could cite you if ever audited and sees that you are treating employees as independent contractors.
  • [quote user="levitruck"] We run a trucking company and our driver wants to switch from a w4 employee who we take taxes out on to a 1099 emplyee who handles his own taxes. How do I change this? Will it cause a red flag at IRS? Thanks for the help![/quote]

    No such thing as a 1099 employee.

  • Yes I believe this is a red flag. If you have other people doing this same job and you are paying them as employees, but you have this person coded as a 1099 then it is a red flag.  Remember that there are many questions you can ask to see if the job does qualify as a 1099, including:

    • Are you setting the hours?
    • Are you giving specific directions on how the job should be done?
    • Is the person allowed independent discretion on how the job should be completed?

     

  • However, trucking has an established industry standard of using a mixture of employees and contractors doing the same work.  However, I'd think you'd need or, at least, certainly want a good business reason for doing so (e.g., can't afford another truck or can't have any trucks in your fleet gone as long as a certain trip requires, etc.)  Microsoft's case is the notorious situation in which programmers who sat side by side and worked on the same projects doing the same work were not all employees.  That's where this mess got started.  If you are a trucking company that has a bunch of drivers as employees, one starts to wonder why you would have any that were contractors and you need to have that answer ready in advance.

Sign In or Register to comment.