Do I have Employees or Subcontractors?

  1. What is the difference between a subcontractor and employee in terms of my business?

The difference between the two has to do with who is responsible for paying employment-related taxes. As an owner that has an employee working for them, they are responsible for the withholding and employment-related taxes for that employee. If your worker is a subcontractor, he/she is responsible for keeping their own records and paying their own income and self-employment taxes.

  1. How do I determine if my worker is an employee or subcontractor?

There are three categories in determining and they are behavioral control and this evaluates if you have the right as an owner of the company to control how the work is done with training and instructions. Another is having financial control and this looks at whether you have the right to control the economic aspects of the work being done. Lastly, the relationships of the parties looks at how you, the owner, and the worker view your relationship and does it have employee benefits and written contracts.

  1. If the worker is a subcontractor, what forms do I fill out to file and report their earnings?

The Form 1099-MISC is the one to fill out from miscellaneous income for payments of $600 or more to your subcontractors.


We hope that this clarifies on the determination of employee and subcontractor debate. Also, if you do have more questions or need more assistance, please don’t hesitate to reach out to us for help. Best of luck the rest of the year and we look forward to seeing you in tax season!