This reoccurring dilemma continues to surface in the cleaning industry. The IRS takes a negative view of any Company trying to avoid payment of the Social Security Tax and states take a similar stance when a company tries to circumvent their unemployment fund.
For example, if you use a subcontractor to do some of your cleaning work, you can pay them without making a deduction or contributing your portion of the FICA tax and other payroll liabilities. However, you are required to issue a 1099 form to them and send a copy to the IRS with your tax return.
Ask yourself the following questions:
- Do they provide their own truck, equipment, chemicals and supplies?
- Do they have their own insurance and provide you a Certificate of Insurance?
- Do they do cleaning for other companies or themselves?
If these questions have a yes response, then you should be within the basic guidelines set by the IRS. We always recommend checking with your CPA and Insurance Agent to be sure all is in order.
Related carpet cleaning business information on the Bane-Clene® web site:
- IRS audit
- Sub-Contracting can be hazardous
- Time to have a talk with your CPA
- What makes a company successful
Thank you for reading Bane's Blog.
The Bane-Clene® Team