Forms for Contract Labor

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Make sure contractors fill out Form W-9 before starting to work.
Make sure contractors fill out Form W-9 before starting to work. (Image: Mariusz Blach/iStock/Getty Images)

The Internal Revenue Service defines contract labor according to how much control you have over a worker’s labor, not on how on how much or when the worker is paid. The IRS sees a big difference between an employee and a contract worker, especially in reporting and wage requirements. This makes the tax forms you submit to the IRS vital to protecting both your business and contract personnel.

Before Starting Work

You have a responsibility to request and retain a form W-9 -- Request for Taxpayer Identification Number and Certification -- from the contractor. However, you do not have to send this form to the IRS. Instead, use the information to verify the contractor has a taxpayer identification number and to fill out year-end forms.

Year-end Forms

A Form 1099 reports payments made to a contractor. Fill out and send a Form 1099 MISC to the IRS, to the appropriate state tax agency and to each contract laborer you paid $600 or more during the calendar year. The IRS gets copy A, the state tax agency gets copy 1 and contract personnel get the remaining copies. IRS regulations for 2014 say contract personnel must receive the 1099 by Feb. 2 of the new year. However, you have until March 2 or March 31 to send these forms to the IRS, depending on whether you file by postal mail or electronically.

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