Hiring someone for your business is an exciting but sometimes complicated matter.  Do you hire someone as an employee or as a contractor?  What is the difference between an employee and an independent contractor?  How do you know if someone is legally able to work in the United States? As you can see, hiring someone can be difficult at times.  It is best to be absolutely certain whether you should hire someone as an employee or a contractor before hiring them.

Who is considered an Employee?

When an employer directs and controls the work performed by the worker, the worker is likely to be considered an employee.  Additionally, if the business has the right to direct or control the financial and business aspects of the worker’s job, the worker is likely an employee.  Moreover, if the worker is receiving employee-type benefits, or the relationship is permanent, meaning there is an expectation that the relationship will continue indefinitely, instead of for a specific project, the worker is likely an employee.

Who is considered a Contractor?

Conversely, contractors differ from employees by probably not having a set schedule.  Rather, contractors are normally hired for a specific project(s).  Contractors do not benefit from employee-type benefits, such as insurance or vacation pay.  Essentially, contractors have more control over the work they do, how they do their work, and when they do their work.

What Forms need to be Filed for a Non-Resident Contractor?

If the contractor is paid less than $600 per year, there are no forms to fill out.  However, if the contractor is paid more than $600 per year, the contractor must fill out a W-9 form, which is an informational form to give to the employer and is not filed with the Internal Revenue Service (“IRS”).  The W-9 form should be completed before the work is done and the contractor receives money for the work performed.  The information from the W-9 form should be used by the employer to complete form 1099-MISC. The 1099-MISC needs to be filed by the employer to the IRS by January 31st of the following year and a copy needs to be given to the contractor by January 31st as well.  Then, the contractor will use the information from the form 1099-MISC to fill out and file their tax return by the April 15 deadline.

What happens if a Contractor refuses to fill out a W-9?

If a contractor refuses to fill out a W-9 form, the employer should withhold 28% of the wages for taxes.  The employer should make up three solicitations to try to get the information from the contractor.  Additionally, the contractor may be fined for refusing to fill out the W-9 form.  Employers may also be fined by the IRS if the IRS requests the W-9 form and the employer does not have one on file.

EPGD Business Law is located in beautiful Coral Gables, West Palm Beach and historic Washington D.C. Call us at (786) 837-6787, or contact us through the website to schedule a consultation.

*Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*

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Eric Gros-Dubois

Eric P. Gros-Dubois founded EPGD Business Law in 2013 and is the current head of the firm’s corporate, estate planning, and tax practice, and manages the firm’s Washington D.C. office. With a JD and MBA, and a specialization in finance, Eric is able to step back and view the legal world through a commercial lens while also acting as a trusted business advisor for his clients. He does his best to be solutions oriented, and tries to think like a business owner, not just a lawyer.


*The following comments are not intended to be treated as legal advice. The answer to your question is limited to the basic facts presented. Additional details may heavily alter our assessment and change the answer provided. For a more thorough review of your question please contact our office for a consultation.

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