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1099 Risk Blog

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January, 12 2009

Contractor Classification Tip #1

 

With the new year afoot, MBO Partners would like to offer you our quick series of essential tips for proper independent contractor classification.

 

Tip #1:

 

Run compliance on all incumbent and new contractors. 

 

Even small corporate entities of one or a few employees could be subject to reclassification. Compliance must therefore be run on all your 1099s, including self-incorporated consultants and small Statement of Work (SOW) vendors or project teams. To minimize the business disruption, consider a phased approach starting with new contractors, and once that part of the program is under control, begin to run compliance on your incumbent contractors with each new work order or contract renewal.

 

Don’t fall prey to the myth that a corporate shell carries much weight in an IRS classification audit, so make sure you do compliance assessments on all small services vendors and self-incorporated consultants.


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