![]() A 1099-NEC lists how much money an independent contractor earned so they can pay taxes on that income. So at the end of the year, you’ll send them a 1099-NEC tax form. At the end of the year, you’ll send them a W-2 tax form that lists their wages and the taxes they paid.Ī 1099 employee doesn’t receive benefits or have taxes deducted from their paycheck. A traditional employee receives benefits, like health insurance and vacation time, and has taxes deducted from their paycheck. Knowing whether a worker is a traditional employee or a 1099 employee is important because it will affect how you handle your payroll. ![]() ![]() Why Is the 1099 Employee Designation Important? Self-employed tradespeople, accountants, lawyers and marketing professionals also fall into this bucket. Other types of 1099 workers include freelance writers, computer programmers and graphic designers. Rideshare companies like Uber and Lyft, food delivery companies like DoorDash and Grubhub, and grocery delivery companies like InstaCart are all part of the gig economy-and their workforce is made up of 1099 workers. Gig sounds like we’re talking about computers, but think of it in rock-band lingo: “Dude, we got a gig at The Roxy.” So a gig is basically a short-term job. These days, many 1099 workers are part of what’s known as the gig economy. It takes the IRS up to six months to issue a ruling. You can also ask the IRS for a status determination by filling out a form called an SS-8. You might have to reach out to a tax pro to help you determine the status of a worker. If this still seems murky, it’s because it is. Contractors pay their own expenses and are free to do other jobs for other companies. You normally pay a contractor based on their output or what they deliver to you rather than for the hours they spend at the office. ![]() On the other hand, if you employ someone who works independently-when and how they want-and you aren’t looking over their shoulder and managing them, you probably have a contractor. 1 If you have say-so over what someone does and how, when and where they do it, then guess what-you’ve got what the IRS calls a common-law employee on your team. Basically, you have to look at the level of control and independence a worker has. The IRS, the reigning king of confusing rules, admits the official employee classification guidelines are a bit blurry. You might be wondering, What are the rules for hiring 1099 workers? If so, you’ve come to the right place.ĭetermining whether someone is an employee or an independent contractor can be tricky for business owners-and that’s not just us saying that. A nonemployee is subject to different working conditions and doesn’t receive the same benefits and payroll deductions as an employee. Though many companies use the term 1099 employee, it isn’t really accurate because the IRS classifies workers who receive 1099s as nonemployees. This form lists how much money you paid them over the course of the year. At the end of the year, you’ll have to send 1099-NEC tax forms to contractors who did work for you. And hiring contractors adds another layer of complexity because that means you’ll have what are commonly called 1099 employees.Ĭalling someone a number might make them feel insignificant, but 1099 really just refers to a tax form. If you own a small business, filing your taxes can be confusing.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |