Is there an amount I can pay a contractor that does not require a W-2?

Question

I once worked as an independent contractor (We're talking about 8 years ago). The person who hired me then told me that as long as my pay was under $600 that he wouldn't need to give me a w-2.

Now I run a small company that just grew enough to hire independent workers, and I need to know if I have to make w-2's for them.

SO, is there an amount where I DON'T have to provide a W-2?

Answer 1

You can pay anyone less than 600 and not document at all ie no w2 or 1099

If an independent contractor is over 600 you issue them a 1099 Misc income form

This is a very grey area though and you should be careful that you are not treating an employee as an independent contractor and that they are fully aware of the situation in writing. There are specific tests on IRS.gov if you have questions about what construes an employee versus an independent contractor

Keep in mind if you are wrong that you will be liable for all withholding taxes, FICA and State with a 100% penatly with interest.

Typically the contractor tells the IRS they thought you were withholding when they get hit with thier 1099 and you will have the burden of proof on you

Get it in writing they are independent

Answer 2

If you have independent contractors they don't get W-2s at all, they get 1099s if they are paid $600 or more during the year. WARNING: Make sure you don't hire employees and call them independent contractors. You can't just wave a magic wand and make it so. If you tell the worker what to do and when to do it, they are probably goiing to be employees. If you pay the workers as independent contractors and IRS later determines they should have been treated as employees, you will be stuck for the employment taxes your should have collected.

Answer 3

A contractor doesn't get a W-2 ever. They get a 1099 - you have to give it to them if you pay them $600 or more for the year.

Whether they get a 1099 or not, the income is still taxable - I assume you paid tax on amounts you got as a contractor even if they were under the $600 limit for the company to have to give you the 1099.

Answer 4

If they make $10 as an employee, you issue them a W-2.
If you make $10 as a contractor, you don't have to issue a 1099-Misc, but you may (the contractor includes it as income no matter what they got).

However, you don't just make a choice. You figure out if they are employees or not.

The guy you paid you 8 years ago was clueless. If he was audited and you were actually an employee, he either lost his deduction for wages and/or he got fined big time.