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Employers need workers to get the job done, but according to the IRS, all workers aren't the same. Some workers are employees, while others are contractors. Each type of worker is treated very distinctly and has unique form requirements. First-time employers often mix these two up, resulting in hefty fines and possibly jail time. So let's take a moment to understand the differences between an Employee vs. a Contractor.
Let's start off with a question:
Who gets a paycheck - Employees, Contractors, or both?
- Employees
- Contractors
- Employees & Contractors, obviously!
While Contractors get paid, only employees receive a paycheck, according to the IRS. The IRS does have some helpful guides about contractors and employers that you can reference. If you're still unsure of the difference between an employee and a contractor, seek legal guidance or use the HR Advisory service available in QuickBooks Online Payroll: Elite.
General differences between employees and contractors:
| Employees | Contractors |
| Work on an ongoing basis | Work for a specific project or time |
| Have required work schedule and location | Decide when and where to work |
| Use tools (e.g. computer) provided by employer | Provide own tools |
| Receive instruction from employers | Decide how to do jobs |
| Can be eligible for overtime & benefits | Can increase earnings with additional jobs |
| Attend corporate meetings & events | Don’t attend corporate events |
| Receive form W-2 | Receive IRS Form 1099 |
If you do hire an employee, new hire forms must be submitted within 20 days of their start date for most states. We recommend checking with your state as they may require it earlier.
Again - if you have questions about how a worker should be classified, seek legal guidance or use the HR Advisory Service under the “Benefits” tab in QuickBooks Online Payroll: Elite.
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