This is an actual real question but it I have also seen it appear in many other forms over the years:
I am a trim carpenter who works for a contractor who pays me as a sub-contractor w/ a 1099, even though I am an hourly employee.
Now he whats me to start filling out a weekly time sheet he supplies. I currently invoice w/ an Adams book. He provides all the materials & most of the tools.
Should he be taking taxes out on me?
He has 5 other full time carpenters who are paid in the same method.
if he is going to ask you to fill out a timecard and supplying you with tools then You Are An Employee and NOT a sub or independent contractor and he probably paying you that way so he can dodge Worker Comp and the other obligations and employer has. Did he ask you to provide him with a liability insurance certificate?
There is a page on the IRS site under tax Topics called Topic 762 – Independent Contractor vs. Employee that starts to help provide some information that can both help individuals understand if they are truly independent contractors or if there “employer” just spun them off so that they could dodge and avoid paying for Workers Comp insurance on them. And business owners can better understand if the people they are using are truly qualified in the eyes of the IRS as independent contractors so that they can avoid the trouble and penalties if somewhere down the road the IRS decides they are really employees.
On that page is a link to a PDF document: Publication 15-A (PDF), Employer’s Supplemental Tax Guide and starting on page 5 there is a section entitled ‘Employee or Independent Contractor?’ and in it they provide some common law rules regarding the classification as they relate to three categories that need to be considered: behavioral control, financial control, and the type of relationship of the parties. And then there are some examples provided specifically to the Building and Construction Industry
Example 1. Jerry Jones has an agreement with Wilma White to supervise the remodeling of her house. She did not advance funds to help him carry on the work. She makes direct payments to the suppliers for all necessary materials. She carries liability and workers’ compensation insurance covering Jerry and others he engaged to assist him. She pays them an hourly rate and exercises almost constant supervision over the work. Jerry is not free to transfer his assistants to other jobs. He may not work on other jobs while working for Wilma. He assumes no responsibility to complete the work and will incur no contractual liability if he fails to do so. He and his assistants perform personal services for hourly wages. Jerry Jones and his assistants are employees of Wilma White.
Example 2. Milton Manning, an experienced tilesetter, orally agreed with a corporation to perform full-time services at construction sites. He uses his own tools and performs services in the order designated by the corporation and according to its specifications. The corporation supplies all materials makes frequent inspections of his work, pays him on a piecework basis, and carries workers’ compensation insurance on him. He does not have a place of business or holds himself out to perform similar services for others. Either party can end the services at any time. Milton Manning is an employee of the corporation.
Example 3. Wallace Black agreed with the Sawdust Co. to supply the construction labor for a group of houses. The company agreed to pay all construction costs. However, he supplies all the tools and equipment. He performs personal services as a carpenter and mechanic for an hourly wage. He also acts as superintendent and foreman and engages other individuals to assist him. The company has the right to select, approve, or discharge any helper. A company representative makes frequent inspections of the construction site. When a house is finished, Wallace is paid a certain percentage of its costs. He is not responsible for faults, defects of construction, or wasteful operation. At the end of each week, he presents the company with a statement of the amount he has spent, including the payroll. The company gives him a check for that amount from which he pays the assistants, although he is not personally liable for their wages. Wallace Black and his assistants are employees of the Sawdust Co.
Example 4. Bill Plum contracted with Elm Corporation to complete the roofing on a housing complex. A signed contract established a flat amount for the services rendered by Bill Plum. Bill is a licensed roofer and carries workers’ compensation and liability insurance under the business name, Plum Roofing. He hires his own roofers who are treated as employees for Federal employment tax purposes. If there is a problem with the roofing work, Plum Roofing is responsible for paying for any repairs. Bill Plum, doing business as Plum Roofing, is an independent contractor.
Example 5. Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. She is to receive $1,280 every 2 weeks for the next 10 weeks. This is not considered payment by the hour. Even if she works more or less than 400 hours to complete the work, Vera Elm will receive $6,400. She also performs additional electrical installations under contracts with other companies, which she obtained through advertisements. Vera is an independent contractor.
