The deadline for issuing 1099s to contractors and consultants who worked with you last year was the 31st of January. There was a last minute flurry of people trying to get w-9s filled out so that they could meet the deadline.
But in the Construction industry this deadline means something different. With the shift in the economy over the last two years, the use of contract and “street workers” has changed the entire industry and many sub contractors are left holding a handful of incorrect 1099s (http://www.wisegeek.com/what-is-a-1099-form.htm) for non existent workers or for workers who have “taken the money and run” to another jobsite or back to their families in Mexico or Latin America.
Contractors and sub contractors who have been using contract workers for the last year are faced with a dilemma. They have issued the 1099s, but they cannot find the folks who are supposed to get them in the mail because of two things.
First, they were given a false or non-existent social security number when they hired the contract workers to work for the company. And they did not use the E Verify system to validate those numbers.
The Immigration Reform and Control Act of 1986 (http://en.wikipedia.org/wiki/Immigration_Reform_and_Control_Act_of_1986) made the social security card the ID card of choice for the workforce. The underground economy manufactures counterfeit cards that can be bought for a few dollars by anyone and they can subsequently be used to find a job on a construction site in most cities around the country. Secondly, they were given a false address for the mailing of those 1099s.
By using these 1099 “independent contractors” the contractors avoid paying state and Federal unemployment and income taxes. In short they really don’t care if they end up holding the stack of 1099s as long as they get the crews filled and the work done safely and for the right price.
Sure, if the contractor paid their taxes, then everything was reported, but for many “contract workers” in the construction industry the paycheck was the ultimate goal.
The Obama administration just announced a crack down on the use of those contract workers by saying that they will stop the misclassification of workers as independent contractors when they are, in reality, employees and should be treated as such.
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