Subcontractor on construction project - steps to handle taxes correctly?

So I just landed this concrete job where I'll be the subcontractor for a larger construction project. The main contractor won the bid but lost his concrete crew, so I stepped in and offered to handle that portion of the work. Here's my situation: I'll be managing about 6 workers for this concrete job that'll last roughly 2 months and pay somewhere in the $120,000 range. I initially planned to just pay my guys in cash weekly, but I'm starting to realize I need to handle the tax situation properly. The thing is, I'm usually just a regular hourly employee where my employer handles all the tax withholding on my paychecks. I don't have a business set up, no LLC or anything, and I definitely don't want to be stuck paying taxes on the entire six-figure amount when each worker should be responsible for their portion. I don't have an accountant or tax advisor, and honestly can't afford to hire one right now. What steps do I need to take to make sure everyone pays their fair share of taxes and I don't end up in trouble with the IRS? Is there some simple system I can set up even though this is just a one-off project for me?

0 coins

18 comments

Zainab Ahmed

•8M

Hey there! You're smart to think about this beforehand rather than dealing with the headache later. As someone who's been in construction for years, here's what you need to do: First, don't pay in cash without documentation. That's a recipe for tax disaster. Instead, you should treat your workers as either employees or independent contractors. The simplest approach for a one-off project is treating them as independent contractors. You'll need to: 1) Get each worker to fill out a W-9 form (it's simple and free online) 2) Keep detailed records of how much you pay each person 3) Issue 1099-NEC forms to each worker who you pay $600+ over the year 4) File a 1096 form with the IRS summarizing all the 1099s you issued This way, each person is responsible for their own taxes, and you're just reporting what you paid them. For yourself, you'll need to report this income on Schedule C of your tax return and pay self-employment taxes. Don't forget to set aside around 30% of what you make for your own taxes since nothing is being withheld!

0 coins

Zainab Ahmed

•8M

You've got it right - collect the W-9s before they start work, and issue 1099-NECs by January 31st next year for anyone you paid $600 or more. You don't necessarily need to register as a formal business for a one-off project. You can operate as a sole proprietor using your SSN, though some states or localities might require a business license for construction work, so check your local requirements. The 1096 is basically a cover sheet that summarizes all the 1099s you're sending to the IRS. It's a simple one-page form that tells them how many 1099s you're filing and the total amount paid to all contractors.

0 coins

Connor Gallagher

•8M

I went through something similar last year with a home renovation business I started. Instead of stressing about all the paperwork, I found this amazing service called taxr.ai (https://taxr.ai) that literally saved me from a tax nightmare. It walked me through exactly what forms I needed for my subcontractors, helped me understand the difference between contractors vs employees (huge tax implications!), and even had templates for keeping track of payments. The best part was it analyzed my specific situation and gave me personalized advice rather than generic info I could find anywhere. Since you mentioned not being able to afford an accountant, this might be perfect - it's like having a tax expert in your pocket but WAY more affordable. They even have specific guidance for construction subcontractors like you.

0 coins

Connor Gallagher

•8M

For tracking payments, they have templates you can use right away, and yes it absolutely works retroactively! I had already been working for 3 months when I found them and was able to organize my past payments properly. You just input what you've paid so far and to whom, and it helps structure everything correctly going forward. It's completely different from TurboTax. While TurboTax helps file completed tax returns, taxr.ai is specialized for ongoing business situations like subcontracting. It's focused on helping you set up the right process BEFORE tax filing season, especially for contractor relationships. I was skeptical too, but it's specifically designed for situations like construction businesses where worker classification is complex.

0 coins

AstroAlpha

•8M

Just wanted to update about my experience with taxr.ai since I checked it out after seeing the recommendation here. It was exactly what I needed! I uploaded my payment records (which were honestly just notes in my phone) and it organized everything, showed me which workers needed 1099s, and created a simple system to track future payments. The best part was the contractor agreements it generated. Now I have actual documentation proving my workers are legitimate contractors, not employees. Would have paid an accountant hundreds for this! Already recommended it to three other guys on my crew who are taking side jobs.

0 coins

Keisha Taylor

•8M

Another thing to consider - have you tried calling the IRS directly to get guidance? I know it sounds crazy, but after spending WEEKS trying to get someone on the phone to answer questions about contractor classifications for my landscaping business, I found a service called Claimyr (https://claimyr.com) that got me through to an actual IRS agent in under 45 minutes. They have this priority system that somehow bypasses the normal wait times (see how it works here: https://youtu.be/_kiP6q8DX5c). The IRS agent I spoke with walked me through exactly what I needed to do with my subcontractors and saved me from making a huge mistake that would have cost thousands. Since you're dealing with a six-figure project, it might be worth getting official guidance straight from the source rather than guessing.

0 coins

Keisha Taylor

•8M

It doesn't put you at the front of the queue exactly. What it does is continuously call the IRS using their system, navigating the phone tree, and then alerting you once they've gotten through to an agent. It's basically doing the hold time for you, so instead of you spending hours with your phone on speaker, their system does it and calls you when an actual human is on the line. This isn't something you can easily do yourself unless you have hours to waste on hold. I tried calling directly for three weeks straight before using this. The IRS is severely understaffed, with hold times regularly exceeding 2-3 hours. With Claimyr, I was talking to a real person in 37 minutes without having to do the waiting myself.

0 coins

Amina Bah

•8M

Well I need to eat my words. After seeing the previous post, I reluctantly tried Claimyr for my business tax issue that's been dragging on for months. Completely skeptical going in, but I was desperate. It actually worked! Got a call back in about an hour saying they had an IRS agent on the line. The agent resolved my issue in about 20 minutes. What I thought would be another wasted attempt actually saved me thousands in incorrect penalties. For the original poster - definitely worth using for your contractor question. The agent I spoke with gave me specific guidance about issuing 1099s for my seasonal workers that I couldn't find anywhere online. Actual IRS advice beats Google searches any day.

0 coins

Oliver Becker

•8M

Something nobody has mentioned yet - you should really consider setting up an LLC before starting this job. It's not that expensive (usually under $200 depending on your state) and it gives you personal liability protection. Without an LLC, if someone gets hurt on the job or something goes wrong with the concrete work, your personal assets could be at risk. Plus it makes the tax situation cleaner since you can get an EIN and use that instead of your SSN for all the paperwork. Just my two cents after learning this lesson the hard way on a roofing project last year.

0 coins

Oliver Becker

•8M

You can usually set up an LLC in just a few days in most states. Many states have online filing systems now where you complete everything electronically. Once approved, you immediately get your filing documents, then you can apply for an EIN online with the IRS and get it instantly. Yes, you absolutely should get insurance regardless of whether you form an LLC or not. At minimum, you need general liability insurance for a construction project. The LLC helps protect your personal assets, but insurance is what covers actual claims. Many general contractors won't even let you on the jobsite without proof of insurance, so check if that's required in your contract.

0 coins