Question

HVAC Corporation with Sub Contractor 1099 MISC non-employee compensation, does the business owner have to verify the Sub Contractor has General Liability Insurance and Worker's Compensation, or can the non-employee be handled some other way?

Answer 1

As per IRS, a subcontractor is a worker who is not your employee. You give a Form 1099 to a subcontractor showing the amounts you paid him. The subcontractor is responsible for keeping his or her own records and paying his or her own income and self-employment taxes.

If a corporation hires a subcontractor, the business owner have to verify the Sub Contractor has General Liability Insurance and Worker's Compensation. This is because some insurance companies, damage caused by independent contractor while representing the company on the job is excluded from your general liability coverage. That’s why many small companies won’t work with subcontractors unless they carry their own general liability insurance.

Also, it is a good idea to have require the independent contractor carry worker's compensation. This is because if the subcontractor is not covered and an on the job injury occurs, corporation will be financially responsible.