These relevant facts fall into six main categories: There are many facts considered when deciding whether a worker is an independent contractor or an employee. Neither the employer, nor the worker, has the authority to make this distinction. Under Mississippi Law §71-5-11 J.(14), the Mississippi Department of Employment Security (MDES) is the governing authority to make this decision. For additional information on the 1099-NEC form, please see the IRS site.Is your worker an independent contractor or an employee? Note: Beginning with calendar year 2020, the IRS will be using form 1099-NEC for reporting independent contractor earnings. we’re here to help! Just go to and let us take the hassle out of preparing and filing your forms. When you're ready to file 1099-NEC forms for your contractors. And write checks to the business name - not the individual. Treat your contractor as a vendor under accounts payable. The invoice should be for the total project cost, never hourly. Request an invoiceĪnother action you can take to help validate independent contractor status is to request an invoice for work completed. You might even require in the contract that the contractor show proof of liability and workers’ comp insurance, if that’s important for the type of work being done. And always, always include a liability clause. If you’re concerned about competitors, you can include a confidentiality clause and even a noncompete. Sometimes there’s a good cause for a contractor to charge back direct expenses, such as supplies or travel, but it’s always better to roll these into the price, if you can.įinally, the contract should specify that the contractor is free to pursue other customers and clients. It should state explicitly that the contractor will use his or her own tools, equipment and supplies, and pay all related expenses. It also should indicate an end date, or at least tie the end of the contract to the completion of a specific project. The agreement should specify how much you’re going to pay, and under what terms. In fact, be sure to title the document, "Independent Contractor Agreement." The agreement establishes that the contractor is not an employee of your company. Agree on the agreementĭon't do business with an independent contractor until you have a signed legal agreement. You can download a free W-9 form on the efile4Biz site by clicking here. Once you receive the form, store it in a secure place, because it contains sensitive information, including Social Security numbers. It's a best practice to have your contractor provide a completed W-9 before work even begins. (Prior to 2020 the form used to report independent contractor payments was 1099-MISC.) The W-9 form captures the name, address and taxpayer identification number (TIN) of each contractor who requires a 1099-NEC. You can't complete your 1099-NEC* forms without it. The first step to working with an independent contractor is getting a W-9 form. Let's look at the necessary paperwork to help ensure you don’t accidentally cross the line when working with freelancers, consultants, temps and other contract workers. When you start to work with a contractor, you want to make sure you get it right. And the penalties for getting it wrong can be crippling, including having to pay back taxes and steep fines. The IRS has strict rules that define who can be treated as a contractor and who is an employee. This is an excerpt from our e-guide, "Avoiding Employee Misclassification with Independent Contractors." The complete - and FREE! - e-guide can be downloaded here.
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