While employers are not required to provide their employees who receive 1099 forms at year’s end with workers’ compensation insurance, it is important that as an employer, you understand how those independent contractors are classified under the IRS rules. Improper classification can lead to bothersome ramifications.

It is not that contractors are trying to “trick” you, but many contractors are confused themselves about the difference between common-law and statutory employees. It is your responsibility as a business owner to determine which contractors are classified as independent contractors under the IRS rules.

Contract Workers

An independent contractor is typically defined as someone who works for themselves as a tradesperson with clients. Rule of thumb: If you control the result of the work but not the process of how the work is completed, that person is a contractor. It is important to remember that just because an employee works for you temporarily, that does not necessarily classify them as a contact worker. Workers’ status can often be determined if the worker performs duties at their own place of work. If you are unsure of how to classify an employee, your best bet is to check with the Internal Revenue Service (IRS), free of charge. This will eliminate any wrongful classifications of workers, avoiding fines and penalties.

Workers’ Compensation

While providing these contractors with workers’ compensation is not required by law, you have the ability to do so if you wish. You may want to consider checking with your property and casualty broker to see if you can add a contractor to your existing workers’ compensation policy.

Agape Brokers Insurance Agency is available to help you formulate a workers’ compensation policy based on the unique needs of your business. Contact us today for all of your Hemet, California business insurance needs. We have been providing California residents with superb insurance services for over 23 years.

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