What is difference between employee and contractor?

What is difference between employee and contractor?

When it comes to determining an employee from an independent contractor, many business owners are unsure how to identify a worker's classification. The table below highlights some of the differences between an employee and an independent contractor.

Employee

  • W-2 Form
  • Works for mainly 1 company at a time.
  • The employer controls income.
  • Paid on a consistent basis (e.g., hourly, weekly, monthly)
  • May be eligible for overtime pay.
  • Income, Unemployment, Social Security & Medicare taxes are withheld from wages paid.
  • They can qualify for the company and government benefits.
  • Part of the company's daily workings with a continuous ongoing relationship and integrated responsibilities.
  • Follows guidelines to how, where, and when work is to be completed.
  • Is trained by the company to perform their job.
  • They are provided tools to do the job.
  • They are subject to firing, discipline, and rewards.
  • They can terminate their services at any time.

 

Contractor

  • 1099-NEC Form
  • They may do work for multiple companies at a time.
  • The individual determines income profit or loss.
  • They are paid per invoice submission or upon completion of the job.
  • They are not eligible for overtime pay.
  • No taxes are withheld from payment for services provided.
  • They are responsible for seeking and arranging their benefits
  • Hired when needed.
  • Establishes how and when work is to be completed.
  • They are already trained and skilled to perform the job.
  • Brings own tools, equipment, and materials to work site.
  • Is responsible for self-employment.
  • They are required to complete contracted work.

 

At Trout CPA, we understand it can be confusing to determine if a worker is an independent contractor or an employee. For assistance, don't hesitate to get in touch with us at 717-569-2900 or complete the form below.

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