@MSD11_20 wrote:
oh just to clarify, the Managers are 1099s as well.
From June to October, they hired their team as a W2 then transitioned into 1099 this November.
I don't feel comfortable about this situation. You can't "hire" an "employee" and then "transition your team" to the status of independent contractor, at least not legally. Whether a worker is an employee or an independent contractor is controlled by many factors and working conditions, and unless those factors and working conditions also changed, then the people may be misclassified, subjecting your company to substantial penalties.
https://www.irs.gov/newsroom/understanding-employee-vs-contractor-designation
Assuming the designation is legitimate, then who you pay depends on your relationship to the parties. Suppose you contract with Amy to perform a project for specified compensation. If Amy has the authority to hire whomever she pleases as subcontractors (Bob and Cathy), and Amy determines what parts of the project they work on and what they will be paid, or Amy could do the entire project on her own without help, then Bob and Cathy are Amy's subcontractors. You pay Amy the price for the contracted service, and Amy pays her subcontractors, whomever they may be. If the company contracts with Amy, Bob and Cathy to perform a project, then all 3 are contractors of the company, even if the company assigns Amy to be the project leader.
And, you really should have written contracts with all your contractors that already spells all this out. I suggest a legal review of the entire situation by a qualified tax attorney or enrolled agent.
