What Defines Self-Employed 1099 Versus Employee?


Quick Answer

A self-employed person is defined as someone who is in business for himself, while an employee works for another individual or company and is under control of that individual or company, according to the IRS. A self-employed individual receives a 1099 for his wages, while an employee receives a W2.

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Full Answer

The IRS additionally states that a self-employed person provides services for another company or individual but is not under direct control. This means the company cannot tell the worker what he does or how he does his job. An employee is told how to do his job, when to do it, and where to do it.

A self-employed individual receives a 1099 at the end of the year, which outlines all monies paid to him, but no taxes are withheld. The taxes are the sole responsibility of the individual. An employee receives a W2 at the end of the year, and taxes are paid by the employer, says the IRS.

A business that misclassifies an individual as an independent contractor when he is really an employee may be held liable for employment taxes, notes the IRS. Any individual who feels his is misclassified should file a form with the IRS that calculates how much the potential employer should have paid in taxes on his behalf.

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