My sales director is moving to another city and wants to continue selling as an outside contractor. Since he is going from employee to independent contractor, will I have a problem if he receives a W-2 and a 1099 from us for 2014?
From sales director to outside sales consultant
Answers
I don't see any problem. Just make sure that he signs ALL the exit documents (Quit claims, etc) you have and he signs a new contract that explicitly contains provisions that he is responsible for the taxes incurred from his new sales activity income and more importantly, that there is NO EMPLOYEE/EMPLOYER RELATIONSHIP.. As an additional layer of assurance, some have been advocating that the contractor establish a separate formal entity so that your company is dealing with that separate entity and not the actual person.
1
This is actually an easier process:
a) in the reverse, i.e., from IC to employee
b) beginning of a new calendar year (no longer an employee).
Draft an independent contractor agreement outlining the pay/fee structure and the effective date the employment is terminated and the agreement goes into place. You shouldn’t have a red flag over issuing a W2 and a 1099, but the agreement would be enough “back up” for regulating bodies.
We had something similar happen, we just transitioned that person as a telecommuter and they did the same job remotely and kept the employee status.
1
Thank you, Emerson, Wayne and Karoline!
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