Hiring Independent Contractors

Jbyrnes · #1 (**permalink**) 12-30-2009, 11:29 AM

Hello.
I currently run a mystery shopper/merchandising company that on a regular basis would hire people as independent contractors nationwide (except NV) to handle a shop. On average the shoppers are paid about 5 to 15 dollars plus expenses for their time. Most shoppers are not paid as employees and are simply paid as 1099 independent contractors due to the brevity of their employment and lack of full time work.
I have read recently that the IRS is classifying these employees as the same as under the table cash employees now and will be fining heavily the companies that use Independent Contractors that do not have at least 3 other income streams. Without being too technical, would anyone be able to tell me what my options are. I have a possible contract for 50,000 shops a month nationwide and to hire 50,000 employees as full time W-2 employees to work for 1 to 2 hours would not be feasible in my business plan. Please let me know any thoughts on this.

Thanks in advance for any help.

Justin Byrnes

TaxGuru · #2 (**permalink**) 01-10-2010, 01:30 PM

The IRS will review the Independent Classification based on the individual circumstances for each company. In my opinion, it would not be feasible to put report these workers as W-2 Employees considering the activity they are engaged in, but, nowadays, the IRS is getting very strict in this area and you are right to be concerned!

I would review the following article that we wrote earlier Will your employee's status as an outside contractor pass the IRS litmus test?

Hopefully, if you meet most of the tests as listed in the above article, there is a strong possibility that you may indeed designate your employees as an “Independent Contractor” status.

I suggest that you also consult a large CPA firm for further advise and provide them with greater detail regarding your individual facts and circumstances for the people that you have hired, and in this way you would have additonal comfort in the position you are taking, assuming they agree with your position.