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Old 07-25-2016, 02:56 PM
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Start-up company: 1099 & W2 Mix

Hello, Here is a little back ground... I am in the middle of structuring a start-up business. Company is currently a C-corp, but we have plans to make a B-corp by Jan. 2017. We could be considered a type of scientist temp agency (Multi-state). We receive requests for proposals or consultants, and we place the scientist and charge client accordingly.

We have employees who will be salary (W9, W4 needed?), but we also have "subcontractors".
These subcontractors do not have their own business and would like us to deduct taxes from their check for them, but they are not a full-time or part time employee. They essentially get paid on a per contract basis. They would prefer to not have a 1099, and so would we since they increase their rates for independent contractor because they are taxed so much.

Is there another tax form I should use or another way to classify them as an employee?

I use Quickbooks...they told me to call the IRS and I can't get them on the phone. QB said we could set them up as a vendor, but I would have to 1099 them. Plus because of the different state tax factors, they are unsure of what forms to use or how to set up. Not technically an employee, but not an independent contractor. I would like to offer to do the tax aspect for them, but I am unsure of the best approach.

Any info. or help is very much appreciated! Thanks!



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Old 07-27-2016, 09:00 PM
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Hello, Here is a little back ground... I am in the middle of structuring a start-up business. Company is currently a C-corp, but we have plans to make a B-corp by Jan. 2017. We could be considered a type of scientist temp agency (Multi-state). We receive requests for proposals or consultants, and we place the scientist and charge client accordingly.

We have employees who will be salary (W9, W4 needed?),====> IRS recently came out with a Chief Counsel Ruling that says there are certain circumstances when a person can fill both employment roles at the same company , at the same time. So an individual could be working for your company in one department in a capacity that makes him an employee but also do work for another department in the capacity of an independent contractor.

but we also have "subcontractors".
These subcontractors do not have their own business and would like us to deduct taxes from their check for them, but they are not a full-time or part time employee. They essentially get paid on a per contract basis. They would prefer to not have a 1099, and so would we since they increase their rates for independent contractor because they are taxed so much. ========.they still need to file returns as contractors aslongas the amount on SCh C line 29 / 31 is $400 or exceeds $400 and also need to pay SECA tax when the amount on SCh SE line 2 / 3 is $400 or exceeds $400. So you need to issue them 1099

Is there another tax form I should use or another way to classify them as an employee?===In my opinion, unless they are your regular W2 employees, no you need tom issue them 1099MISC; you may offer IRS SS4; Ifit is still unclear whether a worker is an employee or an independent contractor,Form SS-8 can be filed with the IRS. The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker?s status.
Be aware that it can take at least 6 months to get a determination, but a business that continually hires the same types of workers to perform particular services may want to consider filing the Form SS-8 .


I use Quickbooks...they told me to call the IRS and I can't get them on the phone. QB said we could set them up as a vendor, but I would have to 1099 them. Plus because of the different state tax factors, they are unsure of what forms to use or how to set up. Not technically an employee, but not an independent contractor. I would like to offer to do the tax aspect for them, but I am unsure of the best approach. =======>>you need o contact the irs for more info



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