STRONGSVILLE, OH / ACCESS Newswire / October 27, 2025 / Payroll4Construction, a specialized construction payroll service, released "Construction Tax Benefits: How Contractors and Independent Contractors Manage Their Filing" - a critical resource helping construction companies properly classify workers and avoid costly IRS penalties.

According to recent data, fines for underpaying quarterly taxes surged dramatically - from $1.8 billion in 2022 to $7 billion in 2023 - with affected taxpayers averaging 14 million filers receiving penalties, and the average penalty nearly $500. Understanding appropriate tax status and all filing implications has never been more important for construction businesses.

This comprehensive guide explores critical differences between W-2 employees and 1099 contractors that can impact a worker's take-home pay by thousands annually. While W-2 contractors benefit from automatic tax withholding and employer-paid benefits, they have less flexibility and fewer tax deduction opportunities. Independent contractors, on the other hand, face the full 15.3% self-employment tax burden but can deduct business expenses that W-2 employees cannot.

Other key distinctions covered in the guide include:

• Why independent contractors must file quarterly, while W-2 employees have automatic withholding

• The $600 threshold triggering 1099-NEC forms versus year-round W-2 reporting

• How contractors should set aside 25-30% while W-2 employees see smaller net paycheck impacts

• Multi-state obligations that affect both classifications differently

• Three-year IRS record retention requirements for all workers

The resource also details the complex realities both groups face when working across state lines. W-2 employees working in multiple states need proper withholding for each jurisdiction, while independent contractors must track and file in each state themselves.

Both groups face additional municipal taxes in cities like New York, Philadelphia, or Detroit, adding another layer of complexity to multi-state construction work.

Payroll4Construction simplifies these challenges for companies managing W-2 employees and 1099 contractors.

The service calculates and distributes W-2s and handles all tax filing requirements - federal, state and local as well as monthly, quarterly or annual. Payroll4Construction also manages certified payroll, prevailing wage requirements and classification compliance - eliminating errors that trigger IRS audits.

Access the complete guide here.

About Payroll4Construction

Payroll4Construction is a payroll solution just for contractors. Payroll4Construction can help manage prevailing wage, complete multi-jurisdiction payroll, cut checks, issue direct deposits and so much more. For information, call (800) 949-9620 or email info@payroll4construction.com.

About Foundation Software, LLC

Foundation Software delivers job cost accounting, estimating and takeoff, project management, safety management, HR management, mobile field apps and payroll services to help contractors run the business side of construction. For information regarding any of the products listed above, please visit https://www.foundationsoft.com/, call (800) 246-0800 or email info@foundationsoft.com.

SOURCE: Payroll4Construction