Useful Resources

W2 vs 1099

IRS 20-POINT 1099 CHECKLIST

How to determine if a contractor should be paid on a W-2 or 1099?

The IRS has established a 20-point 1099 checklist that can be used as a guideline in determining whether an individual is an employee or an independent contractor. Employees should be paid using a W-2 and an independent contractor is paid using a 1099 form.

Following are the 20-points that have been established.

Instructions. An employee must take instructions about when, where, and how to work from management staff.
Training. An employee may be trained to perform services in a particular manner. Independent contractors typically use their own methods and therefore receive no training from the service purchaser.
Integration. An employee performs services that are integrated into the business operations because the business is dependent on the service provided by that individual.
Services rendered personally. An employee personally performs services.
Hiring assistants. An employee works for an employer who hires, supervises, and pays workers. An independent contractor can hire, supervise, and pay assistants.
Continuing relationship. An employee typically has a continuing relationship with an employer.
Set hours of work. An independent contractor can set their own hours, while an employee usually has set hours of work established by an employer.
Full-time required. An employee may be required to work full time, while an independent contractor can generally set their own hours.
Work done on premises. An employee will usually work on the premise of an employer, or a location that has been designated by the employer.
Order or sequence set. An employee may be required to work in the order set by an employer.
Reports. An employee may need to turn in reports to an employer, which implies a degree of control.
Payments. An independent contractor is typically paid by the job or commission, while an employee is usually paid by the hour, week, or month.
Expenses. An individual who is reimbursed for business and travel expenses is generally an employee.
Tools and materials. An independent contractor must typically supply themselves with necessary tools and materials, while an employee is provided them by the employer.
Investment. An independent contractor has an investment in the facilities used to perform services.
Profit or loss. An employee is free from suffering a loss or realizing a profit from their work.
Works for more than one person/firm. An employee only provides services to your company, while an independent contractor generally can provide services to two or more firms at a time.
Offer services to the general public. Independent contractors make their services available to the general public.
Right to fire. An employer can fire an employee, while an independent contractor cannot be fired as long as they produce a result that meets to requirements of the contract.
Right to quit. An employee can quit their job without incurring liability, but an independent contractor is responsible for the completion of a contract and can be legally obligated to make good for failure to complete it.

This list can be quite overwhelming. If you are still unsure what form to use, please contact Cynthia Spera CPA

TEAM BUILDING DEDUCTION

Small business owners understand the value of nurturing strong relationships within their teams through team-building activities. What many small business owners might not be aware of is the potential tax benefits associated with properly categorizing these team-building expenses. There is a valuable tax benefit you may be missing out on.

The IRS and entertainment expenses

Team-building falls under the general category of entertainment expenses. The IRS has clear guidelines to ensure that these deductions are claimed appropriately

To qualify as a tax deduction, the primary purpose of the entertainment event must be conducting business with a reasonable expectation of obtaining specific business benefits. Team building checks those boxes—effective team-building activities can enhance employee collaboration, boost morale, and improve overall productivity, all of which contribute to business success.

However, it’s important to differentiate team-building events from leisure activities. The IRS generally does not consider leisure activities with no clear business purpose as deductible; they must be aligned with organizational goals.

The following expense categories can be included as part of your team-building costs and are 100% deductible:

Food and beverages: Whether it’s providing meals during team-building workshops or hosting client dinners, you can include the costs of food and beverages.
Venue booking: If you’re organizing a team-building event at an external location, the venue booking charges can be part of the employee entertainment expenses.
Accommodation: When team members or clients need to stay overnight for an event, the accommodation costs can be factored in.
Other entertainment costs: This category covers miscellaneous expenses like hiring performers, arranging live music, or providing gifts for employees and attendees.

Make sure that you can prove that your team-building expenses are eligible deductions by maintaining comprehensive documentation. To ensure you’re getting the most out of your deductions, consider the following:

Expense tracking:
Categorization:
Documentation:
Link to business outcomes:

If you’re unsure about the deductibility of certain expenses, PLEASE CONSULT WITH ME.