1099 Mistake

[tomtomtomlinson]

Hello Folks.

My wife had a in home childcare that she was running. She just did it by herself - 6 kids or so. Covid shut her down. During the shutdown, she decided to offer 100% outdoor summer camps. It was a great idea, a ton of people were interested and she doubled her enrollment. She needed help so she found another teacher for the camps. It all happened so fast She thought it was just temporary but the ppl really liked it. Plus we didnt know if she would be shut down and all the covid stuff to manage.

So she just paid the teacher with checks out of her bank acct. No payroll. The teacher stayed through the fall and we talked to a bookkeeper and he said just pay her as 1099 NEC for 2020 and switch her to an employee for 2021. We filed the 1099 now I am really worried b/c reading her it seems like that was a mistake.

Is this something to worry about, or do you think we will be okay if we treat her as an employee from here on out? Anyone have experience with this issue?

Thanks in advance!

[TomCopeland]

Originally Posted by tomtomtomlinson

Hello Folks.

My wife had a in home childcare that she was running. She just did it by herself - 6 kids or so. Covid shut her down. During the shutdown, she decided to offer 100% outdoor summer camps. It was a great idea, a ton of people were interested and she doubled her enrollment. She needed help so she found another teacher for the camps. It all happened so fast She thought it was just temporary but the ppl really liked it. Plus we didnt know if she would be shut down and all the covid stuff to manage.

So she just paid the teacher with checks out of her bank acct. No payroll. The teacher stayed through the fall and we talked to a bookkeeper and he said just pay her as 1099 NEC for 2020 and switch her to an employee for 2021. We filed the 1099 now I am really worried b/c reading her it seems like that was a mistake.

Is this something to worry about, or do you think we will be okay if we treat her as an employee from here on out? Anyone have experience with this issue?

Thanks in advance!

It was a mistake to treat her as an independent contractor. You can always go back and file payroll tax forms for 2020 even though they are late. If you got audited for 2020, you'll have to pay penalties and payroll taxes. You may also be in trouble for not having workers compensation insurance. Again, you can go back and get this insurance now and the penalty will be smaller. Up to you.