Are you confused about whether you should hire a contractor vs employee? If so, you're not alone. Knowing when it's time to hire a contractor instead of an employee is one of the most confusing aspects of employment for many businesses. Below we have provided some tips to help you sort through the confusion regarding independent contractor vs. employee hiring.
One of the most critical aspects of understanding contractor vs. employee hire is in understanding each are classified. If you should incorrectly classify someone as either one or the other, you could held liable for employment taxes as well as a penalty by the IRS.
The basic rule of thumb to remember when trying to determine whether someone is a contractor or not is by asking yourself whether you have the right to control or direct result of the work or the means and methods of accomplishing the result. If you only have the right to control the results of the work, then the individual is a contractor. However, if you have the right to control the means and methods by which the work is accomplished, then the person is an employee.
If you keep the rule regarding what you have the right to control and direct in mind, it will help you to remember the difference between employee and contractor hire. Knowing when and how to hire a contractor; however, requires understanding the various advantages and disadvantages of each classification.
One of the biggest myths regarding contractor vs. employee hire is that you won't be required to deal with reporting income on contractors. This is only partially true. You are still responsible for reporting wages that you pay to an independent contractor if you pay that person more than $600 per year. This information is reported on IRS Form 1099-MISC, Miscellaneous Income.
When you make t
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