INDEPENDENT CONTRACTOR PROCEDURES

Before signing a contract with a vendor to perform a service at your restaurant, the following paperwork is required by Apple American Group:

(1)A completed/signed W-9.

(2)A copy of the contract for the service to be performed. In the contract, it should state that the Independent Contractor holds us harmless and indemnifies us.

(3)A Certificate of Insurance stating the following coverage: General Liability coverage of $1,000,000 with naming us as an additional insured on their policy, Crime with third party liability of $10,000 and Statutory Workers’ Compensation Insurance.

By neglecting to obtain the above information from a vendor, Apple American Group could be held liable for any damage done to our property by an Independent Contractor and/or be assessed a fine of $500.00 per 1099 not produced at year-end. If a vendor refuses to give us their Taxpayer I.D. Number, we are required by the IRS to withhold 28% of their payment.

Vendors as Independent Contractors

The following circumstances must apply for a vendor to be considered an Independent Contractor:

  • A vendor whose payments exceed $600 per year.
  • The vendor is not incorporated.
  • The vendor performs a service for your company.

Below is listed several examples of vendors that might require a 1099:

Examples of Vendors:

Contract Cleaning

Window Cleaning

Musicians

Other Entertainers

Landscaping

Snow Plowing

Professional Consulting such as Attorneys (as of July, 1998)

Security Guards

Maintenance Workers

As a general rule: any payments made to a sole proprietor should require a 1099.

INDEPENDENT CONTRACTOR VERSUS EMPLOYEE

An employee is defined as:

An individual who performs services for another under an expressed or implied contract, for salary, wages, or commission and who acts under the direction of that party. The employer is obliged to withhold income and social security taxes and to pay social security and unemployment taxes on the wage payments. An employee is issued a W-2 at year-end for tax purposes. Also, employees are covered under an employer’s workers’ compensation policy.

Versus an independent contractor that is defined as:

An individual or entity that agrees to perform specific work for another but is not subject to direction or management by, nor is an employee of, the person who contracted for the services. Independent contractors are considered self-employed persons and are responsible for making their own tax payments. An employer has no tax withholding or tax payment obligations with respect to compensation paid to an independent contractor. An independent contractor is issued a 1099 at year-end for tax purposes. Also, independent contractors are not covered under an employer’s workers’ compensation policy.

Employees as Independent Contractors

Employees are never considered to be independent contractors. An employee of the restaurant who wishes to clean the restaurant on the side is not considered an independent contractor, they should be paid through the payroll system unless they have their own cleaning business with a Federal Tax ID#. This situation has only been granted in rare occasions with approval.