First things first, no. The way that you pay your employees and contractors is one of the biggest differences between the two types of workers. The Internal Revenue Service specifically details the importance of accurate worker classifications. How you classify a worker affects the way that you pay them, whether or not you withhold taxes from their wages, and if you offer benefits.
Employees – Put employees on your business’s payroll. Paying an employee their hourly wage or salary is straightforward when they exist in the payroll. You can also withhold taxes, including federal income, Medicare, and Social Security taxes. Employees differ from contractors because you pay for mandatory employment benefits. Full-time benefits often include, but are not limited to, health insurance and other possible reimbursements.
Independent Contractors – You cannot pay an employee as a contractor because you provide contractors with Form 1099 instead of a W-2 form. You do not withhold or pay any taxes on the contractors’ agreed-upon wages. They must independently pay for health insurance and other benefits.
It is natural for employers to ask themselves: Can I pay an employee as a contractor? Additional complications can arise if you hire both types of workers. Understand the differences between a 1099 worker and employee while using software that supports both worker types. We support a multitude of 1099s, W-2s, and related forms with our complete W-2 and 1099 database system. Call us today at (405) 340-0697 or arrange for a free demo.