Good day,

As a small business owner I was forced to make expense cuts to keep my doors open. The biggest impact was compensation. It was either lay off employees or make severe pay cuts.

I changed my employees pay from salaries to hourly pay. My plan is to do this until sales pick up and I can afford to reinstate their previous salaries.

My plan is to 1099 each employee. My question is are there any issues from a tax standpoint or penalities for doing this?