Today, I want to talk about something that might be causing a bit of concern in the back of your mind…
The 1099 vs. W-2 Dilemma.
Now, let’s dive into the nitty-gritty of our cleaning businesses. The IRS is tightening its grip on how businesses classify their workers, and the fear of audits looms large. I’ve been in your shoes, feeling the pressure and uncertainty over 30 years ago. It’s a common story – we start small, and as the business grows, so do the challenges. It can seem daunting, but trust me, the fear is almost always worse than the reality.
The IRS is increasingly stringent about businesses misclassifying employees as 1099 when they should be W-2. It’s vital to know the laws and rules to avoid potential audits that could result in substantial back taxes and penalties. The criteria the IRS examines include behavior, financial aspects, and the type of relationship with workers.
Let’s examine this criteria, so you can act with confidence:
Behavior:
The IRS scrutinizes whether the company controls or has the right to control what the worker does and how the job is done. In the cleaning business, where instructions on when, where, and how the work is done are prevalent, meeting this criterion often designates workers as employees.
Financial:
If the worker’s expenses are reimbursed, the tools and materials are provided, and there’s a consistent pattern of payment, they may be viewed as employees.
Relationship Type:
Training is a key factor. If you provide training, the IRS considers them employees. True independent contractors should have their own cleaning business, their own identification number, and liability insurance.
Working Exclusively:
If your workers are exclusively working for you, the IRS leans toward classifying them as employees.
Here’s a tool you can use to help you evaluate the question of employee or independent contractor, the IRS 20-Factor Test.
I understand the fear and reluctance, having been there myself in my own cleaning business. But the truth is, transitioning from 1099 to W-2 is not as daunting as it seems. There are modern tools like Gusto and QuickBooks Online that make payroll management a breeze.
At Cleaning Business Fundamentals (CBF), we specialize in helping businesses transition legally and strategically. Fear should never hold you back from growing a profitable and compliant cleaning business. Remember, the fear is almost always worse than the reality.
So, why wait? If you’re ready to make the leap and secure the future of your business, explore more about CBF. We offer valuable insights, support, and proven strategies to help you navigate this transition seamlessly.
Don’t let fear dictate your success. Join us in the #1 cleaning business academy in the world — CBF, where we turn cleaning businesses into thriving empires.
