Whether employers should matter 1099 or W-2 Forms to contractors/employees can be hard to make a decision. In making a choice, it is very significant to understand the IRS meaning of an employee and independent contractor.
Did "employees" perform side-work or did "independent contractors" complete the job? If they are employees, then it doesn't subject what job they did, they should be issued a W-2 Form and be treated as employees.
But, if they are independent contractors and were paid $600 or more then the employer should subject 1099 Forms to those that performed the work. If they were paid less than $600, it is not necessary to issue 1099 Forms and it is their compulsion to report the income on their tax returns.
If you are still not sure if they are employees or independent contractors, then you will have to appraisal the IRS rules.
Here we also provide complete solution about
Federal tax forms 1040 and
2011 tax refund
Workers or Independent Contractors? Below is some direction on deciding whether or not they fall beneath the employee or independent contractor group.
If you people answer "yes" to ANY of the questions below, then they are almost certainly independent contractors. 1. Do they, rather than the employer, determine how the job is to be performed? 2. Are they paid by the job or scheme rather than an hourly wage or salary? 3. Are their services offered to the public and not presently to one particular person, boss or company? 4. Do they use their own tools and tools? 5. Do they determine the number of hours worked? 6. Do they have a contract stating that they will be paid as an independent contractor?
If the answer was "no" to the bulk of the questions above then you will want to ask yourself these questions: 1. Do they have set hours of work? 2. Are they paid in usual amounts at set intervals, such as an hourly wage, weekly pay, etc.? 3. Do they work at your workplace or home? 4. Can they be fired? 5. Do they receive training from you? 6. Do they have to follow exact instructions about how the effort is to be done?
