it is very much in your best interest to have workman's compensation on your drivers whether they are considered contract labor or not.

I'm not a tax expert by any means but I'm not sure that you can have worker's comp for a driver and him being a 1099 at the same time.
I'd check on that

 

I agree yoopr. That's what I was trying to say in my unclear way. lol.

The two kind of go together. To me the only real reason to do contract labor is to avoid the worker's compensation. The unemployment taxes are minor.

One thing I suggest is to contact all of your local temp agencies. They will hire your drivers and then contract them right back to you with everything in order...for a small fee of course. Some will even offer programs to allow for vacation and insurance packages if you can afford it. There are other "payroll companies" out there too that do much the same thing.

What I found was that the rates the temp agencies charge were not that bad considering that a small employer pays outrageus rates for worker's comp. Apparently the larger temp agencies get a greatly reduced rate. The only hang up I had was that we only had one temp agency in town and they would not do truck drivers. Anything else I could have gotten. I'm sure that you could find someone to work with you in a larger city.

 

Most states will allow you to have a APP or OPP policy in lieu of workers compensation as long as you don't have over a certain number of employees. In my state, it isn't required unless you have at least 5 employee's. If the driver pays for his own policy, it might be easier to classify him as an independent contractor. These policies are really better than workers comp, anyway. They are usually easier to deal with and pay off with less hassle. The cost is normally less than the cost of workers comp. But then workers comp is through the state and APP or OPP policies are through private sources. Each state has different requirements concerning workers comp. Some states don't require workers comp until you have 8 employees. North Carolina forces you to have workers comp with only one employee, so I have been told.

 

I'm not sure, but i guess :roll: , the only possibly legal way to do that set up, would be, if you just lease your truck to the driver. He makes a lease payments to you, and the rest is up to him! :roll:

 

If you are going to 1099 a driver you need to get them to sign a document where they understand that they are responsible for all taxes and that they are not an employee, but a independent contractor. Everything should be spelled out in black and white so there are no misunderstanding about who is responsible for the taxes. You still must meet certain guidelines. Simply having a verbal agreement will likely not protect you, especially if the former employee denies that you had any agreement.

I am curious as to why the labor people got in touch with you. Did your former driver file for unemployment insurance?

 

This arrangement may satisfy various state agencies, but it won't mean anything to the IRS should they decide to look at you.

 

It depends on your relationship with the driver as to whether he can or should be considered an employee or an independent contractor. The IRS looks at trucking a little differently than if you work in a factory.

 

That is not an accurate statement. The standards applied in determining worker status are exactly the same, regardless of the industry involved. Trucking happens to be an industry that has never drawn much scrutiny on this issue, though the current Fedex case may awaken a sleeping dog.

Even though there are several tests the IRS would apply, there's really only one that they will have to apply in the driver/contractor scenario:

Why are you classifying the driver as an independent contractor?

I can't think of many explanations that will seem legitimate other than the avoidance of associated taxes, and you certainly can't say that.

 

I am only repeating what the IRS has told me. Those are the exact words I was told when I visited my local IRS office a few years ago. If you pay a salary, provide benefits or workers compensations, you will have a difficult time making a case for the driver to be an independent contractor. The IRS told me that it had to do with control. If the driver decided what loads he took and where he went, then he could be considered an independent contractor. There were a few other things which fit my situation that enabled me to classify my people as independent contractors. I am only passing along what I was told. Each situation can be somewhat different. According to what I was told, some drivers can legally be classified as independent contractors much the same way as some salesmen can be classified in the same way. I pay percentage rather than mileage. That may also have been a factor, but the control seemed to be the most important factor to them.

 

What about an o/o who is leased to a company. A lot of these companies pay for base plates etc, and the company is finding them loads. So are they independant or not?