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Marketing person as 1099 ok?

              November 4, 2014

Question:

Hi Jennifer,

I am hiring a marketer for my practice and want to classify him as a 1099 independent contractor. Is that okay?

Thanks, 
Steve

Answer:

Depends.  This is a great question to pose because many informed readers know that worker classification, wages, overtime pay, etc are huge areas of potential exposure for an employer, one with a lot of audit activity currently at the State and Federal level. 

So, I answer it depends because whether or not the marketer is truly independent and qualifies as such under applicable State and Federal factor tests will determine whether your classification is correct.  

The IRS governs here, and states:

The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done....You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.

factor test is also presented by the IRS:

Facts that provide evidence of the degree of control and independence fall into three categories:
  • Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
  • Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
  • Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.

The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.

Based on the question presented, I really can't answer is the marketer will be independent enough to qualify as a 1099.  Would this individual be in control or dictating the work rendered (direction, control, manner completed)?  Would this individual be working under direct supervision at your location?  Would this individual have set hours?  Would this individual be using your equipment/supplies?  Would this individual receive employment benefits (insurance, etc.)?  Is this individual required to sign off on office policies (i.e., handbook, HIPAA compliance, etc)? 

These factors and more would have to be considered in determining whether proper status has been assigned, and this analysis should be performed for any worker or class of worker you are looking to classify as a 1099.  

Hope this helps!  To discuss the particulars of this situation, feel free to contact Jennifer directly, and/or to discuss with your healthcare accountant.   


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