Jan 13, 2026
Distinguishing between independent contractors and employees is important for both tax and financial reasons. In order to comply with federal tax laws, you've got to be crystal clear about your workers' status, and keep accurate records no matter what. Here's how to distinguish between independent contractors and employees – and why it's important.
Independent Contractor or Employee: The Litmus Test
The federal government provides pages of advice to help companies determine the status of those they employ. It's less a matter of hard-and-fast rules and more a series of guidelines.
Generally speaking, independent contractors:
sure your company is doing it Demonstrate autonomy in their work. While you may give them specific tasks to do, how they do them and where and when are not under your control.
A good example of an independent contractor is a freelance graphic designer hired to make your business logo. The designer doesn't report to your office during set business hours. She has her own computer, software and telephone to complete the task. You've agreed on a deadline and payment terms for the project and provided her with details on how you would like the logo to look, but you don't supervise her work or require her to accomplish the task in a specific way. She's truly an independent contractor.
Don't Blur the Lines
Occasionally, companies blur the lines between independent contractor and employee by overstepping the bounds of the contractor agreement. Some require independent contractors to be on-site for specific hours or to work at a specific desk or location provided by the firm. This may cross the line into employee territory.
Why the important distinction? The federal government requires that employers collect and report wage, salary and tax information for employees. There are new federal health mandates regarding insurance coverage for employees too. If you actually have employees but are treating them as independent contractors for taxation purposes, you're violating many laws and could get into serious legal and financial trouble with the federal and state authorities.
The Importance of Form W-9 for Independent Contractors
Always ask your independent contractors to submit a Form W-9 and be sure to issue 1099 MISC to any independent contractor you pay more than $600 per year. These forms make it clear to the government that your business views the individual as an independent contractor and has kept the distinction clear for taxation purposes.
If you're not sure if you've put everyone in the proper categories, give us a call and we'll help you sort it all out.
© 2026
Sep 24, 2026
Employers are painfully aware that they face a 21st-century skills shortage. Companies are bent on hiring a "new collar" workforce to keep up with advances in technologies like artificial intelligence and automation. Read through to learn about an untapped resource.
Sep 23, 2026
If you're having a problem with the IRS, you have rights! For one, you don’t have to go it alone. You are allowed to have an expert in your corner. Read through for details on the regulations that protect you.
Sep 22, 2026
Inflation is a key challenge that businesses of every size face when developing compensation strategies. Read through to see how your business can position itself in the competitive wage war to attract and retain employees.
Sep 21, 2026
The gig economy, characterized by companies hiring short-term, contract or freelance workers, has been surging since the 2020 pandemic when people were mandated to work remotely. By current estimates, one-third of American workers are doing some form of gig work. Read through to learn more about what this arrangement is doing to traditional payroll structures.
Aug 27, 2026
The pandemic reshaped how and where work gets done, disrupting the U.S. office market and accelerating the shift toward remote and hybrid models. While return-to-office efforts have focused on productivity, collaboration and culture, they have also been influenced by practical concerns such as long-term leases and underused office space. Read through to see how hybrid work continues to evolve.
Aug 26, 2026
Your company has terminated an employee — and now you're bracing for what they might say about their former workplace online. Social media can turn a disgruntled former worker into a very public critic. Read through for an overview of ways to prevent disparagement through culture and policy, deter it with a nondisparagement clause and respond to it with legal help.
More News & Press can be found in our Archive.
