Misclassified Drivers FAQ:
The contract I had the driver sign when I hired them protects me right?
No, the driver cannot sign away their employee rights (unemployment, workers compensation, company health insurance). It doesn’t matter what verbiage the contract has.
What would happen if one of my drivers turns me in?
It depends on who the driver turned you in to. Any government agency will investigate whether or not a driver is actually W-2 or 1099. The agency will go through the 20-point test or the ABC test, which is explained more in this article. But it’s important to know that all of the points are weighted and that there is no set score to determine if someone is in fact a W-2 employee or 1099.
Can I lower the driver's pay to make up for the fact that I'm not paying taxes?
Legally, yes, you can do whatever you want as long as you are still paying minimum wage. But this isn’t really the best way to keep quality drivers as employees. If you want some tips and tricks to recruit and retain quality truck drivers, check out our article here.
Can I fire the driver if they are 1099 and want to be W2?
If a trucking company fires a driver for demanding to be W2, they will create a mess of trouble for themselves. If the government determines that an employee was actually W2 this may result in misclassification issues as well as a wrongful termination lawsuit.
What can my company do if we want to keep our drivers misclassified as 1099?
We advise that you don’t continue misclassifying your truck drivers. If you change your drivers to W2 now, before getting investigated by the government, you could mitigate the issue because they will see that you have already corrected it.
What can I do to correct the pay after switching my employees from 1099 to W2?
The best answer is to fix it as long as it has been happening. We recommend you at least go back and amend prior-year tax forms to show that your employees are being paid W2. Then you would have to pay all of your employee’s social security tax, backdated to the date you choose. The farther you go back and amend your tax forms, the lower your risk that the IRS will go back and investigate you. You can get in trouble with the IRS for past years. If you are unwilling, however, to do that you should still change them to W-2 today and not wait.
What happens to the driver if they are found out? Does the driver get in trouble for being misclassified?
A W2 truck driver could get in trouble for taking deductions on their tax return (disallowed expenses) that are meant for 1099 payees.
What are ways a driver might find out they have been misclassified?
The first thing you can do is be aware and look at your paystubs. If taxes aren’t being taken out of your check you’re classified as a 1099 truck driver. If you’re still unsure you can talk to your tax preparer.
If you are a trucking company who is misclassifying your drivers as 1099:
• Switch all of your employees over to W2
• Fire anyone who doesn’t want to be a W2 employee, or make them buy their own truck
• Then go back to the first of the year and amend all of your tax documents
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