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.
|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.