QUESTION: I have a trainer that I want to move to a 1099 to avoid paying the employer tax- what do you recommend?
ANSWER: DO NOT PAY YOUR TRAINER (or any “employee”) AS A CONTRACTOR! I know it costs a little more to put an individual on payroll, but the risk of being audited is not worth it. I’m going through it now with one of my clients. The Department of Labor will request invoices from your “contractor”, your agreement, their business license, business cards, address, telephone listing, etc. They will be looking to prove there is not an employer-employee relationship, meaning, you don’t control the details of how the services are performed (ie, when, where and how the service is performed).
If your trainer is indeed a contractor, he is collecting money from the client and paying you, he is bringing in his own equipment to use to train the client, he is not required to attend meetings, he is wearing his company’s uniform while training in your gym, etc... If your trainer does not do these things, then he should be paid as an employee. It is highly unlikely he fits the contractor role, please play it safe and pay your trainers as employees! You don’t want to deal with the past taxes and penalties if you are caught.