Many businesses are finding that using day laborers is an effective way to meet their labor needs; however, hiring and paying on a per-day basis does raise legal issues. Not wanting to run afoul of the law, business owners want to know how to handle day laborer pay for taxation purposes.
First and foremost, addressing tax issue related to day laborers depends on the relationship between your business and the workers: You must determine if these workers are considered temporary employees or self-employed contractors.
In most situations, a day laborer is considered a kind of temporary employee. This is because day laborers typically work at the specific direction and under the supervision of a company. A day laborer is considered an employee if the company determines where the work is done, when it must be done, what equipment must be used, what specific tasks must be accomplished and the manner in with these tasks must be done.
Other factors to consider include whether the worker is reimbursed for business expenses, any contracts describing the relationship, any benefits provided and how important the laborer is to the success of the business.
If you determine that a day laborer is a temporary employee, you must report their wages on federal W-2 and W-3 forms. You should fill out a W-2 and provide copies B, C and 2 to the worker by January 31 of the year following when the work was done, i.e. by January 31, 2019 for day labor work done in 2018.
If you determine that a day laborer is a self-employed independent contractor and payment to the worker for the entire year was at least $600, you must report payments on Form 1099-MISC. Copy B of the form should be given to the employee by January 31 of the following year. Form 1099-MISC, copy A should be filed with the IRS by February 28, or March 31 for companies that e-file.
At Nationwide Temporaries, we make hiring day laborers as simple as possible for our clients, so they can focus on their core business activities. Please contact us today to find out how we can help your company.