As an employer or business owner, it is important to know the distinction between employees and independent contractors. When hiring an independent contractor 1099 vs w2, there are a number of guidelines to follow. You will especially notice the differences during tax filing season. So, you should familiarize yourself with certain workplace scenarios. Knowing these scenarios will help you avoid making any costly mistakes.
Managerial Oversight of a Project
How much control you have is important to establish with an independent contractor. Unlike W-2 employees, 1099 workers are only required to produce the final product. A project manager or whomever oversees workers does not influence the worker’s process. It is easy to find yourself in a murky situation if you do not acknowledge boundaries in the beginning. At the end of it all, a manager is only fully in charge of a full-time employee.
Longevity of Working Relationship
When hiring an independent contractor 1099 vs w2, it may be instinctual to expect different working durations. An independent contractor may finish one project and then not return for another. However, these working relationships can also span across years. A non-salaried worker who does not receive benefits is a 1099 worker. Companies must distribute a Form 1099-NEC to the worker if they paid the contractor more than $600 in the last year.
Including Everyone in the Payroll System
There is an easy way to avoid confusion when paying independent contractors. Simply put, do not include them in the payroll system. That may seem intuitive, but instinct may also be to just keep everything in one easily managed place. An independent contractor 1099 vs w2 employee payment mixing can lead to tax and record keeping issues. For all independent contractors, use accounts payables instead. That way, you will not need to double check to see who receives a 1099 or W-2 form at the end of the year.
Determining Time Spent on a Project
For a longer project, you may be inclined to worry you are getting into W-2 employee territory. There is no need for concern. Speak with your independent contractor and fully disclose the estimated amount of time the project will take. You will pay your W-2 workers for any overtime, but that is not the case with 1099 workers. Make sure that expectations are understood and presented in writing before a project begins.
Benefits of Advanced Micro Solutions
Our software makes filing 1099 and W-2 forms easy and manageable. Whether you primarily hire an independent contractor 1099 vs w2 employee, the tax paperwork process should not overwhelm you. Our W-2 and 1099 Software Filer is a popular and reliable option. Any time a new record or form is accessed, the software automatically saves your data.
Our disc-based software ensures that there is not the added concern of losing data if you lose your internet connection. We also provide payroll software. Our Payroll Reporting exports user data to the W-2 and 1099 Forms Filer for processing at the end of each year.