Employee vs Contractor
In your business, you’ll get to a point where you’ll need to outsource some of those long lists of tasks sitting on your desk. Whether you hire an employee or a contractor, it is very important that you classify this ‘relationship’ correctly from a legal perspective (to avoid future headaches).
Here’s a brief description of how to distinguish one from the other:
Employee
Their schedule is usually set by their employer, usually works on-premise, and plays an integral role in the company.
For Employee(s): you will need to file a W-2, as well as withhold and pay certain taxes and benefits.
Independent contractor
Is exactly that- independent! They’re free to set their own schedule, paid hourly or per project. (Virtual assistants, Graphic designers or Copywriters are few examples) For independent contractors: ask each one to fill out a W-9 form and you must issue a 1099-MISC to each contractor whom you paid $600 or more during the tax year. If you paid the contractor(s) through Paypal (goods & services) or credit card, then you do NOT need to issue a 1099-MISC. The deadline is January 31st.
For more about this topic, you can read the IRS article for more clarification.
Quick Tip
Ask your contractors to fill out a W-9 form BEFORE you start paying them. This will save you time (and headaches) when tax time comes.
