The amount of control the employer has over the worker determines whether the worker is an employee or an independent contractor (also called a 1099 contractor, freelancer, or self-employed).
When you hire 1099 contractors, add and pay them as vendors (not as employees). For more information, see Pay a 1099 contractor as a vendor.
| Employee | Independent Contractor |
|---|---|
| The employer controls what work must be done and how. | Self-employed workers control how the work gets done. |
| The employer supplies the tools to complete the work. | Self-employed workers usually provide their own tools. |
| The worker is an employee who works, usually exclusively, for the employer. | The worker is self-employed and has an independent business serving multiple clients. |
| Employers pay employment taxes on an employee's behalf. | Self-employed workers pay their own employment taxes. |
| At year-end, employees receive a W-2 form. | At year-end, self-employed workers receive a 1099, unless they are incorporated |
See IRS Publication 15, Circular E: Employer's Tax Guide for more info.
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