Rideshare drivers will automatically be classified as 1099s with Prop 22

Proposition 22 appeared on the 2020 ballot as the rideshare and app-based driver responded to AB5. California Proposition 22 was passed by voters in California and defined app-based rideshare drivers, such as Lyft, Uber, and Grubhub drivers, as 1099 independent contractors instead of W-2 employees.

The Employment Development Department (EDD) sends audit letters through the mail. If you receive an audit letter, you have 30 days to reply. Typically, the agency audits back three years from the most recent tax filing. However, EDD sometimes will audit the previous year’s tax filings.

The Ultimate Guide to Payroll Tax Audits

Before deciding between hiring a W-2 employee and a 1099 worker, it’s beneficial to weigh the differences in costs between the two. Consider, depending on the job, one may be a more cost-effective option than the other.

What do you need to know about commodity inflation?

Over the past year, commodity prices, especially in the lumber industry, spiked. Simultaneously increased demand for buildings, backyard renovations for new patios and decks all impacted the lumber industry as it saw record-breaking peak prices never seen before. Now, as demand has slowed its pace, prices are dropping again, but what does that mean for the lumber industry and homeowners?

The Ultimate Guide to Payroll Tax Audits

Read our frequently asked questions to get a better understanding of the difference between 1099 independent contractors and W-2 workers.

Why Might it be Preferable to Hire an Independent Contractor?

An independent contractor, also known as a gig worker, is hired on a contractual basis by an employer for a specific job. This could be to build a patio deck, to install flooring, and much more. These contractors are hired for an agreed-upon job, can work for multiple employers simultaneously, and overall have more work independence.

How can gig workers prepare for tax season?

Gig workers, otherwise known as independent contractors, complete jobs on a contractual basis. They have the autonomy to choose when and where they work, have control over work instructions, evaluate their own work, and are well versed in the job they’re hired to complete. Their behavioral control is unlike employees who are told when and where to work, how to work, and who may require job training.

6 Best Gig Work Websites

Hiring experienced, reliable employees helps you, as a business owner, complete your project with efficiency and reliability. Independent contractors, otherwise known as gig workers, provide services based on a contractual agreement.
They have different behavioral control, financial control, and relationships with employers than W-2 employees. When it comes to hiring an independent contractor or subcontractor for your next project, do you know where to look? We’ve pulled together a few of our favorite resources to begin hiring your next independent contractor.

1099-NEC vs 1099-MISC

In 2020, the rules for filing and submitting 1099-NEC and 1099-MISC tax forms changed. Moving forward, 1099-MISC forms are no longer used to submit nonemployee compensation. This separates nonemployee payments from miscellaneous payments and eliminates the confusion around form due dates.

Filing either 1099-NEC or 1099-MISC requires the completion of a Form 1096 as well. This is an Annual Summary and Transmittal of U.S. Information Returns that summarizes all of your 1099 files for the year. IRS uses this form to summarize the tax forms businesses send to hired workers.

W9 vs 1099

As an employer hiring independent contractors, like construction workers, you need specific tax forms that differ from those given to full-time employees. The forms needed for 1099 workers include W-9 and 1099. Both forms provide the employer and employee with the correct tax files to ensure compliance with IRS regulations. The main difference between the forms is in files the form and what financial documentation is provided. Understanding the difference between these forms will help make sure you’re ready for tax season.