STPS

Misclassified Drivers FAQ

Running a trucking company is already tough, but dealing with legal issues like misclassifying drivers can make it even harder. You might think that cutting corners by classifying your drivers as independent contractors saves money, but the truth is, it could cost you much more in the long run.

At Superior Trucking Payroll Service, we understand the unique challenges faced by trucking companies because we are the only payroll service in the U.S. that focuses exclusively on the trucking industry. We’re here to help you navigate these complex issues and ensure your trucking company stays compliant.

In this FAQ, we’ll answer some of the most common questions about misclassified drivers and provide guidance on how to avoid costly mistakes.

The contract I had the driver sign when I hired them protects me right?

No, the driver cannot sign away their employee rights, such as unemployment, workers’ compensation, or company health insurance. It doesn’t matter what the contract says; those rights are protected by law.

What would happen if one of my drivers reported me?

It depends on who the driver reports to. Any government agency will investigate whether the driver should be classified as a W-2 employee or a 1099 independent contractor. They will use the IRS 20-point test or the ABC test to make this determination. It’s important to note that these tests don’t have a set score, the outcome can vary.

Can I lower the driver's pay to make up for the fact that I'm not paying taxes?

Legally, yes, you can adjust the pay as long as it meets minimum wage requirements. However, cutting pay could hurt your ability to keep good drivers and affect your company’s driver retention.

Can I fire the driver if they are 1099 and want to be W2?

Firing a driver for requesting to be classified as a W-2 employee could lead to serious legal trouble. If the government finds that the driver should have been a W-2 employee, you could face misclassification issues AND a wrongful termination lawsuit.

What can my company do if we want to keep our drivers misclassified as 1099?

We strongly advise against continuing to misclassify your drivers. If you switch them to W-2 status now, before any government investigation, you may reduce the potential consequences by showing that you’ve corrected the issue.

What can I do to correct the pay after switching my employees from 1099 to W2?

The best thing to do is to fix the problem as soon as possible. Review and amend previous years’ tax forms to reflect the correct W-2 status. You’ll need to pay your employees’ Social Security taxes retroactively. The more years you amend, the lower the risk of an IRS audit. If you’re not willing to go back, you should at least change their status to W-2 now and avoid further delays.

What happens to the driver if they are found out? Does the driver get in trouble for being misclassified?

A W-2 driver might face issues if they have taken tax deductions for 1099 contractors. These disallowed expenses could lead to trouble with the IRS.

What are ways a driver might find out they have been misclassified?

Drivers should check their pay stubs. If taxes aren’t being withheld, they are likely classified as a 1099 contractor. If they’re unsure, they should talk to a tax professional.

If you are a trucking company who is misclassifying your drivers as 1099:

  • Switch all of your employees to W-2 status.
  • Consider terminating those who do not want to switch, or require them to purchase or lease their own truck.
  • Amend your tax documents from the start of the year to reflect these changes.

Misclassifying drivers can be a costly mistake for trucking companies. Even though it might seem easier in the short term, the risks far outweigh the benefits. By following the steps outlined in this FAQ, you can correct any misclassification issues and avoid potential penalties. Additionally, finding a trustworthy payroll service that understands the unique needs of the trucking industry can make this process much easier and ensure everything is handled correctly from start to finish. It’s always better to address these problems now before they become more significant issues down the road​​​.

Next Step: Article: Can I pay Employees and Contractors on the Same Payroll?
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Written by Harley Houlden

Harley joined Superior Trucking Payroll Service in early 2019. With nine years of customer service experience, she truly understands what it takes to make our clients happy. She loves working  here because of the family-like atmosphere. Harley’s favorite place to be is Traverse City, Michigan or anywhere that has hippos.

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