Is Your 'Contractor' Actually an Employee?

NO. This is illegal. If you are an officer of an S-Corp, you MUST be on W-2 payroll for your 'reasonable compensation'. Paying yourself via 1099 to avoid payroll taxes is tax evasion.

No. Payroll software processes what you tell it to. If you tell it to pay an employee as a contractor, it will, until you get audited. We provide the advisory layer to ensure you are entering the correct data.

You must file a 1099-NEC for any unincorporated service provider (contractor, attorney, landlord) you paid $2,000 or more/year via check, cash, or wire. Payments made via credit card or PayPal are generally excluded.

The most common trigger is when a contractor files for unemployment benefits, they must disclose who paid them and how. State labor agencies often share that information with the IRS. A single former contractor claim can open a multi-year audit of all your 1099 workers.

You need a well-drafted independent contractor agreement, evidence that they work for multiple clients, documentation that they control their own methods and schedule, and records showing they supply their own tools. We help you build and maintain this documentation before an audit happens.