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Prime Contractor Liability

Most small businesses are unaware of the passage of RCW 51.08.181 last year defining how a prime contractor is responsible for his subcontractor or independent contractor business filings with the IRS and record keeping requirements in the State of Washington. Some industries in the state, such as Janitorial, have been told all of their independent contractors are covered workers per a 1995 ruling by the BIIA for Dana’s House Keeping.

In order to avoid this regulatory trap, make all checks out to the DBA  name such as “Joe Smukatella dba Joes’ Cleaning” or the corporate name. No personal names on checks–ever! Instant employee! Next check with the Department of Licensing every quarter to see if that firm is current. I have some prime contractors call each month to the bonding and insurance companies to make sure they have not cancelled.

The tough part is finding out if the firm is still filing quarterly taxes with the different departments.  A simple task is to ask who is doing their books: themselves or an accountant. L&I and ESD will want to verify with this new law.

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