Your employer cannot simply call you an independent contractor to avoid federal and state legal requirements – if the characteristics of your job resemble those of an employee, then your employer must treat you as an employee. An independent contractor’s job is characterized by independence.
Why would a business hire you as an independent contractor?
Pros of Hiring an Independent Contractor Reduced Overhead: The attraction of hiring an independent contractor is the reduced costs in: expenses, payroll, benefits, and other overhead. Lower overhead means less stress to bring in new business revenue to cover costs.
What do you call a person who hires an independent contractor?
An independent contractor is a self-employed person or entity contracted to perform work for—or provide services to—another entity as a nonemployee. The payer must correctly classify each payee as either an independent contractor or employee. Another term for an independent contractor is “freelancer.”
Can a small business hire an independent contractor?
Part of the appeal of hiring independent contractors at a small business is that they don’t come with as much hiring paperwork as employees. But this fact doesn’t absolve you of the responsibility of filling out and filing the necessary tax forms for these types of workers.
What kind of tax forms do I need when hiring independent contractors?
Before determining which tax forms you need when hiring independent contractors, you’ll have to determine whether or not the worker you hired meets the definition of being an independent contractor. The misclassification of workers at the time of hire may put you on the hook for paying employment taxes for that worker down the line.
What do I need to sign as an independent contractor?
Form W-9 must be signed by all independent contractors when they begin work for your business. This form is required to provide a tax ID number (social security number, employer ID (EIN), or other. The W-9 form serves the same purpose as a W-4 form for newly-hired employees.
What are the responsibilities of an independent contractor?
Your responsibilities include: File IRS Form 1099-MISC telling the IRS (and your state tax agency) how much you paid the worker. Get the independent contractor’s taxpayer identification number. If they don’t have one, you need their Social Security number.