Expert: Ed McFarland - 2/7/2007

Question
I have a personal training business in New Jersey.  I am at a point now where I need to hire a few trainers in order to grow.  My question is can pay them as sub-contractors?  I would be paying them for orientations and training sessions.   

Mark Hibbard  

Answer
Its possible to treat them as sub contractors and pay them on a 1099 basis. There are rules that you need to be careful to follow or you will have treat them as employees. Check www.irs.gov and the NJ site sites for the details. If it is picking up a session here or there, you should be good to go.

The way most contractors get in trouble is that they have strict schedules and the sub has no flexibility, like an employee, you'll end up putting them on a W2 and paying the taxes. Another way is the sub doesn't understand filing quarterly estimated tax payments, ends up with a problem and chucks you under the bus.

If you really want your business to grow and having a reliable crew, you may want one or 2 employees and fill out the schedule with subs.

Good luck