Proper Contractor (1099) vs Employee (W‑2) Classification

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What this is

IRS rules restrict who can be treated as a contractor.

Why it matters

  • Improper classification can:
    • Trigger audits
    • Disallow deductions
    • Create payroll tax penalties

Required for contractors

  • W‑9 collected before payment
  • Written contract
  • 1099 issued annually

Strategic benefit

Proper structuring preserves deductions and reduces audit risk.

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