There are two types of business relationships which may exist between an employer/owner and a employee/worker. They are 1. Independent contractor and 2. Employee (common-law employee).
These business relationships are established based on common-law rules:
- Type of Relationship
Helpful forms and publications for independent contractors include Form 1099-MISC and Publication 15 – Circulation E, Employer’s Tax Guide.
Form 1099-MISC is used to report payments to certain types of vendors for certain types of services:
- Payment to someone who is not your employee;
- Payment for services in the course of your trade or business;
- Payment to an individual, partnership, estate, or in some cases, a corporation; and
- Payments to the payee of at least $600 during the year.
- The payor’s name and address.
- The payor’s federal identification number.
- The recipient’s identification number.
- The recipient’s name and address, and
- Box 7 – the amount paid to the independent contractor for the year.
If you need additional help handling your 1099-MISC and job classification issues feel free to connect with me on TaxConnections.
Author: Darren Sanfordis a CPA, entrepreneur and network marketing professional. He is a 22+ year veteran in the small business tax and accounting industry, with an emphasis in home based business. He is active in accounting and tax education groups both as a trainer and a student and is a beta tester for continuing education programs for the AICPA.