10/28/2026
📣 **Business owners: Paying someone with a 1099 does NOT automatically make them an independent contractor.**
Neither does signing a contractor agreement—or the worker asking to be paid that way.
**What matters is how you actually work together.**
Here’s an easy way to understand the difference:
👤 **An employee generally works under your direction.**
You may set their schedule, train them, and tell them how to complete their work.
🧰 **An independent contractor generally runs their own business.**
They typically decide how to complete the job, manage their business expenses, and offer their services to other customers.
**Think about these questions:**
• Who decides how the work gets done?
• Who provides the tools and pays the expenses?
• Is the person operating their own business, or working as part of yours?
No single answer decides it. The entire working relationship matters.
💵 **Why does this matter?**
For business owners, getting it wrong can mean back payroll taxes, penalties, and other costs.
For contractors, taxes generally aren’t withheld from their payments. They usually need to plan for income tax **and** self-employment tax—and may need to make estimated payments.
**Before you decide “I’ll just pay them as a contractor,” let’s review the arrangement.** A little planning now can help prevent an expensive surprise later.
*This is a general overview. State and labor-law rules may differ from IRS tax rules.*
— Melissa | CFO Tax and Advisory
