Paying hourly can pay 1099?

[Tammy]

Hi
I'm new in business . I've owned a hair salon since May 2015 with 2 employees. The taxer told me I'm ok to pay 1099 when my employees get pay by hourly. But asking another CPA they say it's wrong. But it's too late to go back
I and employees didn't sign any paper work before. May I get any trouble with IRS. How can I do now?
Thanks

[Evan]

It really depends on the arrangement you have with the two "employees" -- though using that term indicates that you believe they may in fact be employees as well. What are they doing? Some salons you have stylists who pay "rent" for the chair and then everything else is theirs, or you take some commission on their sales. If you're paying them hourly for work performed that does seem like it's an employee relationship.

You COULD get in trouble with the IRS, though that's minor. It's the state that will have the biggest issue especially if you let someone go and they file for unemployment and they are denied as they weren't "employed". You should really just correct this going forward. You'll need to get worker's comp insurance as well.