This answer lays out the forms and tax documents that companies prepare for Independent Contractors (ICs), as well as highlighting two best practices: the use of written contracts and tracking of invoices. Show If it’s your first time hiring contractors, be aware that the IRS is aggressive in pursuing abuses of the tax system. So, if a company is unsure whether the individual is a legitimate contractor and not an employee, the first step is figuring that out. The difference is crucial, as misclassification could result in significant fines and penalties. Form W-9The IRS requires contractors to fill out a Form W-9, request for Taxpayer Identification
Number and Certification, which you should keep on file for at least four years after the hiring. This form is used to request the correct name and Taxpayer Identification Number, or TIN, of the worker or their entity. A TIN may be either a Social Security Number (SSN), or an Employer Identification Number (EIN). Make sure the contractor checks the box exempting him from tax
withholding. As a separate business entity, the IC should file his or her own self-employment taxes. Zenefits preps and stores this document for companies that hire and pay contractors through the platform. What’s your biggest 2022 HR challenge that you’d like to resolveAnswer to see the results Form 1099-MISCWith limited exceptions, if you pay the IC $600 or more for services provided throughout the year, you must provide him or her with Form 1099-MISC. January 31st is usually the due date that your company needs to have sent the 1099 form to its recipient. For e-delivery, a company needs to have delivered the email to the recipient informing them that their form is ready. Zenefits offers the option to prepare and store the 1099-MISC for independent contractors. A Written ContractA contract, ideally prepared by an attorney, should outline the project and its expected results, the project fee and dates for deliverables. The contract should also specify:
Red flags arise when a client repeatedly hires the same IC. Make sure you create a fresh contract for each new project. Zenefits offers its clients a template agreement prepared by Orrick. InvoicesOnly make payments against submitted invoices. Do not accept expense reports. Equipment, mileage and similar items form
part of the IC’s business expenses, not yours. Keep all invoices on file, and make sure they coordinate with Form 1099-MISC.
Independent Contractor vs. EmployeeIf you are not sure whether the individual is an employee or an independent contractor, the IRS, U.S. Department of Labor, your State Compensation Board, your State Workers’ Compensation Insurance Agency, and your State Department of Labor provide guidelines on how to make the call. If, after reviewing the information, you are still not sure whether a worker is an employee or an IC, file [Form SS-8 with the IRS. The IRS will review the evidence and officially determine the worker’s status. This is especially useful for businesses that repeatedly buy the same type of services. Helpful LinkForms and Taxes for Independent Contractors Bookmark(0) Please login to bookmarkNo account yet? Register Lauren PeralesAs an HR Advisor at Zenefits, Lauren provides guidance and best practices to companies of all sizes with any HR and compliance questions. In her spare time, she enjoys reading and chasing her three dogs around. Are independent contractors w2 or 1099?1099s and W-2s are tax forms.
A 1099-MISC is used to report payments made to independent contractors (who cover their own employment taxes). A W-2 form, on the other hand, is used for employees (whose employer withholds payroll taxes from their earnings).
Is a w9 the same as a 1099?Key takeaway: W-9s and 1099s are tax forms that are required when you work with an independent contractor. Form W-9 is completed by the independent contractor and provides details on who they are. Form 1099 is completed by the employer and details the wages being paid to the contractor.
Is a w9 for independent contractors?Form W-9. If you've made the determination that the person you're paying is an independent contractor, the first step is to have the contractor complete Form W-9, Request for Taxpayer Identification Number and Certification.
What 1099 form do I use for independent contractors?Report payments made of at least $600 in the course of a trade or business to a person who's not an employee for services (Form 1099-NEC).
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