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Hiring Employees

1099 Compensation
W-9 (For Independent Contractors)

Add a 1099 Contractor to Patriot Software

Yes the contactor should fill out both the W9 form and the 1099 Contractor form as listed above.

We can run 1099 payments along with payroll, this makes year end 1099 processing super easy.
DO NOT let employees or contractors start work without proper documentation. If you fail to collect the right forms, you could be liable for taxes and penalties. 

When is it okay to pay a person 1099 compensation instead of W2 wages?
A business can hire a 1099 contractor (independent contractor) instead of an employee when certain conditions are met. The distinction between an employee and a contractor is critical because it affects tax reporting, withholding, and compliance obligations. Here are the key factors to consider when determining whether it is appropriate for a business to hire a 1099 contractor:

Behavioral Control
The business can hire a contractor if it does not control or direct how the work is performed. This includes:
When and where to work (e.g., contractors set their own schedules).
What tools to use (contractors typically supply their own tools).
Training (contractors usually rely on their expertise and don’t receive detailed training from the business).

Financial Control
The contractor must have a degree of financial independence. This includes:
Contractors being able to seek work from other clients or businesses.
Contractors having the potential for profit or loss (e.g., they might incur business expenses for which they are responsible).
The contractor typically being paid per job or project, rather than receiving a regular wage or salary.

Relationship of the Parties
The nature of the relationship should align with the contractor model:
Contractors typically have a written agreement (e.g., an independent contractor agreement) stating they are not employees.
Contractors do not receive employee benefits such as health insurance, retirement plans, or paid time off.
The engagement is typically for a specific project or defined period, rather than an indefinite, ongoing relationship.

IRS Guidance on Independent Contractor Status
The IRS uses a “Common Law Rules” test that considers:
Degree of control and independence. If the business exercises significant control over the work process or treats the individual as an employee, the IRS may reclassify the individual as an employee. This could result in penalties for the business.

When is it NOT Appropriate to Use a 1099 Contractor?
If the worker performs duties integral to the business on an ongoing basis.
If the business provides training, tools, and detailed instructions.
If the worker is economically dependent on the business (i.e., they rely on a steady paycheck).
If the worker is expected to work exclusively for the business.

Why It Matters
Misclassification of employees as independent contractors can lead to:
Back taxes for employment taxes (Social Security, Medicare, unemployment).
Penalties from the IRS or Department of Labor.
Potential lawsuits for unpaid wages or benefits.

Work Opportunity Tax Credit

What is the Work Opportunity Tax Credit?

The Work Opportunity Tax Credit (WOTC) is a federal program that rewards employers for hiring individuals from specific groups who have faced significant employment barriers. The credit generally ranges from $1,200 to $9,600 per eligible employee, depending on the target group, the employee’s first-year wages, and the total hours worked.

There is a strict application deadline for employers to claim the WOTC. Employers must submit IRS Form 8850 on or before the day a job offer is made. Within 28 days of the employee’s start date, the employer must file this form, along with either ETA Form 9061 or 9062, with their State Workforce Agency (SWA). Once certified, taxable employers can claim the credit using IRS Form 5884 as part of the General Business Credit on their federal income tax return.

Fill out forms 8850 and 9061 with your employee, then login to your WOTC account: https://wotc.jfs.ohio.gov/UserLogin.aspx?ReturnUrl=%2f

Who Is Eligible? (Target Groups)
Currently there are ten target groups which include:
• Long-Term TANF (Temporary Assistance to Needy Families) – $9,000 (over two years)
• VOW (Veteran Opportunity to Work) – up to $9,600
• Short-Term TANF – $2,400
• SNAP (Supplemental Nutrition Assistance Program) or Food Stamps – $2,400
• SSI (Supplemental Security Income) – $2,400
• Ex-Felon – $2,400
• Designated Community Resident – $2,400
• Vocational Rehabilitation or Ticket to Work – $2,400
• Long-Term Unemployed – $2400
• Summer Youth – $1,200
The maximum tax credit ranges from $1200 to $9600, depending on the employee hired. The employee must work at least 120 hours to utilize the credit.

Manage WOTC

1. Bookmark this page: https://wotc.jfs.ohio.gov/​​
2. Establish a WOTC account by emailing wotc_contact@jfs.ohio.gov with your company’s name, address, and Federal Employer Identification Number (FEIN) and the name and address of the person will who be submitting these forms. Once the Ohio SWA processes your request, they will send you an email with your username and a link to create your password.

 Make it a habit!

1. Once you are used to filing these, it should take about 30 minutes at most per new hire to submit these online.
2. Make your mindset, “Yes, I would like potentially to reduce my company’s tax liability by $2,400 to $9,600 in 30 minutes.”
3. Please note that claiming WOTC is very time sensitive to the date of hire so submit them as soon as possible and your company is very likely to benefit!​
4. If you can, dedicate 1 hour a week where you can file these WOTC claims, all at once, once a week.

Click Here to Download The WOTC .zip file

Download, right click the zip file, extract all, open the extracted file.

Terminating Employees

Please notify our payroll department if you terminate an employee. This helps prevent errors and keeps the employee list manageable, we also need to know the date of termination for records.