The simple answer is you cannot be a “1099” employee, period. The fact you are receiving a “1099” Form at the end of the year means you are not an employee. When you work for a company, you will either be an employee (includes part-time and full-time) or a subcontractor. It is vital for the professional investigator to understand the difference, especially in the State of Florida. Failing to do so will place you and the company you are working for in harm’s way.
The State of Florida refers to the professional investigator as the “private investigator.” (An issue I wrote about in an earlier blog.) The State issues two types of licenses for the private investigator. There are the Class “C” Private Investigators license and the Class “CC” license for private investigator interns. The CC licensee must be working under the supervision and control of a sponsoring C licensee.
Florida State Statutes require any individual who performs private investigative services possess a Class C or Class CC license. The statute also requires the Class C or CC licensee to own or “be an employee of” a Class “A” agency. The employee requirement means Class C and CC licensees must work for an agency and cannot subcontract work. Only properly licensed investigative agencies may subcontract work.
The Private Investigator’s Handbook produced by the Florida Department of Agriculture and Consumer Services, explains this in simple terms. The handbook reads, Class C and Class CC licensees may not subcontract. (Pg. 2 of the handbook)
I recognize this may be different for other states. Therefore, I highly recommend you contact the organization responsible for regulating professional investigations in your state. If you’re not sure who that is, look for your state’s association for private investigators. I am confident they will be more than happy to help you find out. In fact, the question is so common they probably already know the answer.
Think About the Forms You Had to Fill Out!
You may be asking yourself, am I an employee or a subcontractor? How would I know? When the company hired you, what forms did you have to fill out? Did you fill out a W-4 Form or a W-9 Form? At the end of the tax year, did you receive a W-2 Form or a 1099-misc Form?
Company Employee (W-2)
When a company hires you as an employee, you complete the W-4 Form. The W-4 Form is also known as the “Employee’s Withholding Allowance Certificate.” You complete the W-4 Form so the company (your employer) can withhold the correct federal income tax from your pay. For example, you may tell your employer you are single, with zero dependents. This results in their withholding a higher amount from your pay for taxes than claiming married with three dependents. As an employee, you pay your portion of the federal taxes, and the employer pays their part.
Company Sub-Contractor (1099)
When a company hires you as a subcontractor, you complete the W-9 Form. The W-9 Form is also known as the “Request for Taxpayer Identification Number and Certification.” You complete the W-9 Form so the company can report the amount of money paid to you. You are responsible for paying your taxes. The company claims the money paid to you as a business expense, similar to their marketing or telephone expenses. You became a cost of doing business as a subcontractor and are not their employee.
Think of it like this. When you build a house, you hire a contractor who subcontracts work to other vendors. You pay the contractor for the job, and they pay the subcontract for their portion of the job completed. The contractor will pay the plumber, cabinet maker, electrician, etc. Each entity pays their own taxes, carry their own insurances, and so on. They are working for the contractor, but they are not employees.
As you can see, the form you complete established your role with the company. The fact you filled out and filed a W-9 form makes you a subcontractor, not an employee. Do not let the fact they call you a 1099 employee confuse you. If you filled out the W-9 Form and received a 1099-misc at the end of the year, you’re a subcontractor, not an employee.
Remember, only licensed investigative agencies may subcontract investigative work, at least within the State of Florida.