1 hr 9 min
1099 Truck Drivers Legal or Not TalkCDL Trucking Podcast
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- Careers
1099 TRUCK DRIVERS LEGAL OR NOT. We recently sat down in the studio and talked about the ever growing pool of 1099 truck drivers. We were asked a question. Is it legal or illegal to pay a truck driver without holding his taxes back, thus calling him a 1099 truck driver? We went to the best resource to find out and that was the IRS.
The IRS has a series of questions they ask when determining if a company is legally or illegally paying their drivers correct. They call it the "IRS 20 factor test". It is a series of strategic questions that you may ask yourself, to determine how to classify your drivers. 1099 TRUCK DRIVERS LEGAL OR NOT
We won't go into all the questions, but you can go to the "factor test" yourself for the complete list of questions.
The first question on the list is, what Is the Level of Instruction? The answer from the IRS is simply "Independent contractors render services on their own terms. If a business demands how, where, and when to do a particular job, it’s indicative of employment". Another question is Are there materials and tools provided? The answer the IRS gives is simply this "Again, independent contractors invest in tools and materials required for them to their job efficiently. If a business provides these resources, they are working with an employee". Im sure you get the point!
Fines and Penalties
Ruthann looked up the penalties for mis-clarifying your drivers. There were two separate ways the IRS looks at it when determining the penalty. One, was it just an accidental misclassification? And two, was it an intentional misclassification.
The penalty for a mistake is a moderate fine plus the carrier is made to pay the FICA, Medicare and Social Security taxes that would not be "back-due". The penalty for those that the IRS determines to be in violation on the count of intentionally mis-classifying a driver and paying him on a "1099" basis instead of a 'W-2" basis, can be much steeper. In addition to paying all the above mention "back taxes", a carrier can be made to pay an additional 20% of the employees wages.
So if you think about how steep this can get, think of this. If you had 20 drivers that you are paying on a "1099" basis. Let's say you have been doing this for 5 years. Now, let's say the IRS steps in and determines that you did this intentionally. Just in fines alone, it would be $16, 000 per year per driver if the driver has been earning 80K per year. the grand total for this would be $1.6 million dollars in fine plus the back taxes you would have to pay in for the employees.
Troy's Solution
Troy thought about it for a while and said, re-classify your drivers now before it's too late. Turn them into "Lease Drivers"! That's right, make contracts and lease the trucks to the drivers. Now you have proper contract drivers instead of an employee that you are paying on a 1099. Better yet, speak to a Lawer or a good tax accountant. Make sure before a driver that's angry with the company decides to turn you in to the IRS.
* Cocoon MDR the Ap that pays Truckers to Drive* JJ Keller the Truckers Secretary * National Carriers Solos, Teams, Students, Regional, lease drivers* a href="http://talkcdl.
1099 TRUCK DRIVERS LEGAL OR NOT. We recently sat down in the studio and talked about the ever growing pool of 1099 truck drivers. We were asked a question. Is it legal or illegal to pay a truck driver without holding his taxes back, thus calling him a 1099 truck driver? We went to the best resource to find out and that was the IRS.
The IRS has a series of questions they ask when determining if a company is legally or illegally paying their drivers correct. They call it the "IRS 20 factor test". It is a series of strategic questions that you may ask yourself, to determine how to classify your drivers. 1099 TRUCK DRIVERS LEGAL OR NOT
We won't go into all the questions, but you can go to the "factor test" yourself for the complete list of questions.
The first question on the list is, what Is the Level of Instruction? The answer from the IRS is simply "Independent contractors render services on their own terms. If a business demands how, where, and when to do a particular job, it’s indicative of employment". Another question is Are there materials and tools provided? The answer the IRS gives is simply this "Again, independent contractors invest in tools and materials required for them to their job efficiently. If a business provides these resources, they are working with an employee". Im sure you get the point!
Fines and Penalties
Ruthann looked up the penalties for mis-clarifying your drivers. There were two separate ways the IRS looks at it when determining the penalty. One, was it just an accidental misclassification? And two, was it an intentional misclassification.
The penalty for a mistake is a moderate fine plus the carrier is made to pay the FICA, Medicare and Social Security taxes that would not be "back-due". The penalty for those that the IRS determines to be in violation on the count of intentionally mis-classifying a driver and paying him on a "1099" basis instead of a 'W-2" basis, can be much steeper. In addition to paying all the above mention "back taxes", a carrier can be made to pay an additional 20% of the employees wages.
So if you think about how steep this can get, think of this. If you had 20 drivers that you are paying on a "1099" basis. Let's say you have been doing this for 5 years. Now, let's say the IRS steps in and determines that you did this intentionally. Just in fines alone, it would be $16, 000 per year per driver if the driver has been earning 80K per year. the grand total for this would be $1.6 million dollars in fine plus the back taxes you would have to pay in for the employees.
Troy's Solution
Troy thought about it for a while and said, re-classify your drivers now before it's too late. Turn them into "Lease Drivers"! That's right, make contracts and lease the trucks to the drivers. Now you have proper contract drivers instead of an employee that you are paying on a 1099. Better yet, speak to a Lawer or a good tax accountant. Make sure before a driver that's angry with the company decides to turn you in to the IRS.
* Cocoon MDR the Ap that pays Truckers to Drive* JJ Keller the Truckers Secretary * National Carriers Solos, Teams, Students, Regional, lease drivers* a href="http://talkcdl.
1 hr 9 min