If you are a freelance worker, or a person who hires independent contractors, you’ve probably come across the term “1099 employee.”
A 1099 employee is someone who works for you, but isn’t technically an employee. There are a variety of professions that typically work independently and are for hire. There are a few differences between these employees and those who actually work for you.
This guide will give you a good idea of who these people are, and what to do when you are them.
Who Are 1099 Employees?
It can often be difficult to distinguish who is a 1099 employee and who is not. The IRS has the final say, and the agency says it’s someone you hire to do a specific task, but that person has control over how that task is executed.
For example, you can tell a carpenter to build you a house. Every detail can be specifically explained and requested, but you can’t tell the carpenter how to pound the hammer or lay the sheetrock.
The same goes for doctors, dentists, pre-schools, and many others. Other professions include veterinarians, real estate workers, law professionals, tax workers, and other professional contractors.
When you’re dealing with these kinds of independent contractors, you are not expected to pay a number of fees that you would if you hired W2 employees. For example, there are income taxes, FICA taxes, and unemployment insurance payments.
The main difficulty in having these employees qualify for 1099 is that there are some paperwork issues that must be addressed. The IRS has its own ideas of what constitutes a private contractor, and they are ultimately the ones who decide who makes the cut.
Paper Work
When dealing with a private contractor, you will need to provide a couple of documents. Any worker that you hire will need to receive a W9. This is a relatively simple document to acquire, and you need only request that they fill it out and send it back to you.
You won’t likely need to do anything with this document. It is simply a measure to verify payment and tax information should you or your employee be audited. It’s wise to hang onto this document for four years after the employment of a 1099 employee.
The second document that you may need to provide is the 1099 form. This is a document that needs to be sent out if the employee makes 600 dollars or more in a given year. Once that mark is reached, you must send a 1099 to the employee by January 31st of the following year.
Keep Your Documents in Order
If you’re consistently paying a freelancer or independent contractor, make sure to keep all payment information in order. This means pay stubs, checks, contracts, and any other information that might signify a business relationship.
It can be difficult to navigate all of the legalities of independent contractors and freelancers. If you’re experiencing challenges handling your 1099 employee taxes or using a check stub maker online, make sure you get all the information on the internet.
HR Future Staff Writer
